IMF Approves Qatar’s Cost Cutting Measures

Qatar is “moving in the right direction” amid lower energy prices and is well-positioned to grow in 2017, the International Monetary Fund (IMF) has said.

In a year-end note, the IMF said authorities’ decision to reduce subsidies on petrol, electricity and water in 2015 and 2016 was in line with their expectations, Doha News reported on January 8.

It also welcomed Qatar’s plan to implement additional taxes on tobacco and soft drinks starting this year, which will help generate extra revenue.

The Doha government first warned of the upcoming ‘sin taxes’ last June. But it did not elaborate on when the fee would be implemented.

In a report at the time, the Qatari Ministry of Development Planning and Statistics (MDPS) said the tax could also apply to fast foods.

The MDPS also confirmed then that Qatar will introduce a 5% value-added tax (VAT) in 2018 as part of a (P)GCC-wide agreement.

Doha-based audit firm BDO Qatar previously said “retailers may reduce their profit margins and absorb some or all of the VAT costs” in order to maintain their sales and survive in the market.

One more factor working in Qatar’s favor in the coming years is non-energy-related growth in the form of World Cup spending. According to the IMF, this will help boost real gross domestic product (GDP) to about 3.4% this year, up from 2.7% last year.

In terms of advice, the body urged Qatar to explore “complementary” revenue measures, such as taxing (P)GCC businesses.