Qatar’s fixed exchange rate regime remains appropriate; International Monetary Fund (IMF) said, and noted the peg to the dollar continues to serve Qatar well.

“The peg has simplified the conduct of macroeconomic policy and provided a credible anchor for economic stability,” the IMF said in its Qatar country report yesterday.

Further strengthening the monetary framework, including enhancing liquidity forecasting, will enable the central bank to smooth sharp liquidity fluctuations, particularly in the present context of tighter liquidity; it will also prove helpful as the economy aspires to further diversification.

The current account posted a deficit in 2016, and the assessment of IMF economists suggests that the external position is weaker than the level that would be consistent with sufficient saving of Qatar’s exhaustible resource revenue (Annex IV).

However, with gradual fiscal adjustment, the estimated current account gap could be closed in the medium term.

“The Qatari authorities believe that the fixed exchange regime continues to be a source of stability for the Qatari economy. They agreed with us that gradual fiscal adjustment is appropriate. They underscored that efforts to safeguard Qatar’s wealth for inter-generational equity had started before the recent decline in oil prices,” IMF noted.

According to IMF deepening domestic financial markets would promote saving and offer borrowing and investment opportunities.

Qatar has a long history of issuing foreign currency denominated sovereign and corporate debt. External financing played a major role in funding the country’s investment programme.

The continued investment in infrastructure and other developmental projects increase the need for diverse sources of funding with long-term maturities and low cost of borrowing. As part of the 2013-16 Strategic Plan, financial market infrastructure was strengthened, including the development of an active debt market.

The establishment of a private debt market needs to be supported by the development of a risk-free yield curve, IMF said.

Further progressive extension of maturities to cover the 9-months-3-year gap and lengthen maturities of bonds beyond 10-years could be considered. This, it said would help in the pricing of other financial instruments.

The authorities had concurred with IMF economists that further efforts were needed to strengthen market infrastructure and, in particular, develop a domestic corporate debt market.

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