Individual banks, especially those that rely on large wholesale funding might face liquidity pressures and either have to resort to the central bank for dollar funding or deleverage, warns the IMF, apart from in foreign reserves of the central bank and lower valuation of Qatar’s external assets portfolio.

“Nevertheless, risks to banking stability appear much lower now after three rounds of bank capitalization and asset restructuring since 2008,” concedes the Fund. Qatar tapped the market with a USD5 billion sovereign bond issuance at favourable yields in November.

“Even so, the drying up of foreign funding channels could hinder the prospects of other borrowers by increasing the cost, and thereby affecting the infrastructure investment plans and non-hydrocarbon growth. Spillovers through financial channels could impact Qatar’s valuation of external portfolios and reduce the value of its foreign assets.”

Of course, an escalation of tensions between Iran and the U.S. which would impact all the Gulf states’ energy exports, is the other big worry for Qatar and the global energy markets.

Beyond that, the IMF is hard pressed to find areas of concern for the country with the world’s third largest proven gas reserves, double-digit growth over the past few years and only 1.7 million people to take care of.

In an era where sovereign solvency is to be cherished, Qatar is practically rolling in it. Indeed the economy has grown five-fold since 2000.

While the U.S. lost its triple-A status and the EU’s sovereign debt crisis exploded, Qatar’s economy grew by 19% in 2011, two percentage points higher than 2010 – not a bad performance coming straight out of the world’s biggest financial crisis since the Great Depression.

But as the country’s LNG production stabilises after years of acceleration, the economy is expected to slow down, relatively speaking.

The IMF notes that the country’s 2012 real GDP will cool down to 6%, with real hydrocarbon GDP slowing down to less than 3%, as LNG production remains constant.

Large infrastructure investment and increased production in the manufacturing sector will maintain real non-hydrocarbon GDP growth at 9%. Average headline CPI inflation is forecast to rise 4% in 2012.

Meanwhile, the fiscal balance is still projected to record a surplus of over 7%, and the external balance is projected to post a surplus of USD47 billion.

MISSING THE GOAL
The IMF does not expect Qatar to meet its target of reducing fiscal dependency on the hydrocarbon sector by 2020.

To be fair, nobody really expected the country to finance its budget from non-hydrocarbon revenues and returns from the Qatar Investment Authority (QIA), within the next 11 years, but the IMF contends that recent increases in expenditures make it an unlikely development.

The recent increases in current expenditures, and the large public sector salary and pension increase for Qataris announced in September, in particular, led to an expansionary fiscal stance in 2011/12, and set back the narrowing of the deficit by 3-4 percentage points of GDP, says the IMF.

“According to staff’s calculation, the non-hydrocarbon revenue would cover about 63% of the total expenditure by 2016/17, implying the need for more effort by the authorities to achieve their target. Given the authorities’ objective and for building buffers for shocks, staff encourages the authorities to save more, especially during booms.”

Still, the effort is commendable as the government hopes to roll out USD100-billion of development over the next few years in non-energy development and for the FIFA World Cup it will host in 2022.

Indeed, capital expenditures will be a major driving force of the non-hydrocarbon economy. Major new infrastructure projects include the airport, the new port, railroad, roads, tunnels, sewage and land reclamation that will keep banks with lending opportunities and construction and engineering companies interested in the country.

But achieving credit growth without overheating the economy will be Qatar’s main challenge.

Credit is already expanding at a fast clip, driven by the public sector, and real estate. Continued growth in the non-hydrocarbon sector and implementation of infrastructure related projects will provide additional demand for credit, says the IMF.

“Against this backdrop, the IMF cautioned that banks and the QCB need to ensure that the overall credit quality does not weaken, particularly in the real estate sector in view of the prevailing excess supply, and the precarious global economic outlook.”

Indeed, if the government rolls out its huge expansionary programme smoothly, it could generate 30,000 white-collar jobs from its new airport facilities alone, which would – in turn – generate demand for services such as healthcare, education, retail and entertainment and housing as the knowledge workers will bring their families.

In short, the economy is expected to fare quite well thanks to a stable LNG income combined with an expansionary capital expenditure.

But that’s just the tip of the iceberg. Here are the other key highlights from the IMF report:

1 The share of hydrocarbon revenues that go directly to the QIA has risen from 24% to 33% between 2004 and 2011, and it is projected to stabilize at around 30% of total cash flow.

2 The share of hydrocarbon revenues in total revenues has been on a declining

trend — with high volatility — but still made up over 60% of total revenues in 2010.

3 Qatar’s revenue make-up is different from the oil rich Gulf countries which are completely beholden to the volatility of oil prices. Qatar’s gas revenues are stable and locked in thanks to long-term LNG contracts.

4 The government’s 2011 salary hike of USD1.6-billion has led to a 5% increase in total expenditure.

5 Qatar’s breakeven oil price is USD40 – considerably lower than its Gulf peers (Bahrain’s breakeven oil price is USD100 and Saudi Arabia around USD80-88).

6 The IMF warns that increase in public sector wages, the convergence of supply and demand in real estate, and possible overheating from large public investment could see headline inflation rise to 5% in the medium term.

7 Financial contagion risks includes increase in cost to public enterprises and banks that have announced intention to issue international bonds. Reduction in wealth due to fall in equity values in Qatar Stock Exchange is another financial risk.

8 The Qatari riyal is overvalued compared to the American dollar, but if the authorities want to balance their budget with non-hydrocarbon revenues, they must save more, the IMF recommends.

9 The Qatari Government has informed the IMF that it will maintain capital expenditure at 40% of total expenditure. It expects to generate revenues from corporate taxes, broadening of the tax base, non-renewal of tax holidays, and the introduction of the withholding tax. The value added tax (VAT) is another option currently being mulled by all Gulf states.

10 The government plans to launch a single financial regulatory regime in early 2012. They are also addressing issues related to Islamic banking to adapt to the new regulatory regime.

11 “Qatar’s real estate market segments would help banks assess risks better and also enable the QCB to take informed pre-emptive regulatory measures to preserve financial stability,” says the IMF. “Additionally, staff encouraged the Qatari authorities to develop a corporate governance code for real estate developers that would contribute to the prevention of excessive risk-taking in the sector.”

12 The banking system has the ability to withstand credit and market risks. Nevertheless, staff underscores the need to monitor individual banks for stress, given the interlinkages in the financial system. Further, individual banks’ foreign currency liquidity conditions need to be monitored and the QCB should stand ready to relieve potential pressures.

CONCLUSION
All things considered, it’s good to be Qatar right now. While the IMF focused solely on the country’s economic prospects, it is important to consider its political outlook.

Qatar has emerged as a champion for the downtrodden Arab citizens, encouraging Egyptians, Libyans Yemenis and Syrians to break the shackles and seek freedom – but has fallen short of extending the same privilege to its own citizens. At the moment, though, the average Qatari citizen is not complaining.

However, Qatar raised a few eyebrows when it participated militarily in the Libyan civil war instead of just funding from the sidelines. While this has raised the country’s profile, it could also expose the country to retaliation and a target by groups that disapprove of its interventionist policy.

The Qataris may also be caught in the crossfire between Iran and the U.S. Doha shares the gas-rich North Field with Tehran but also hosts a U.S. military base, and may be asked to choose sides if the conflict escalates.

But so far Qatar has deftly manoeuvred its way in the region’s political minefield. Given its past exploits, most would bet on Qatar finding a way out of any political quagmire. [Read More]

The move, which resulted in the cancellation of over 200 flights affecting more than 22,000 passengers, came after Qatar Airways ceased negotiations to takeover the troubled airline and the regional Government withdrew funding.

The carrier posted a message on its website revealing it had suspended operations due to ‘exceptional circumstances’, citing “a lack of financial visibility for the coming months.”

Spanair chairman Ferran Soriano revealed “We were in a very advanced process of finding a financial partner, but we were notified by the regional government that it couldn’t finance our operations anymore and that Qatar wouldn’t invest.”

The Spanish airline, which has more than 2,000 employees
Spanair, founded in 1986, operated from 15 Spanish airports with an extensive route network including Europe, Africa and the Middle East. The airline, which carried 12.56 million passengers in 2011, employed over 2,000 staff.
Affected passengers are being told to contact a special hotline that has been set up while updates are available via Twitter. Meanwhile Iberia, Vueling Airlines SA and Air Europa are providing reduced fares to Spanair customers. [Read More]

Jan. 25 (Bloomberg) — Arab and Western nations are planning a diplomatic push at the United Nations to persuade Russia to back the Arab League’s call for Syrian President Bashar al-Assad to relinquish power.

Qatar, Morocco, the U.S. and the U.K. are among the nations trying to overcome Russian resistance to sanctioning Syria by promoting a UN Security Council draft resolution that has strong Arab backing, according to a UN diplomat who wasn’t authorized to speak on the record.

The measure “condemns the continued and gross violations of human rights and fundamental freedoms” by Syrian authorities and calls for the Assad regime to implement Arab League resolutions for a “political transition,” according to a copy of the document obtained by Bloomberg.

“We are going to present all Arab resolutions, including the one from two days ago, to the Security Council so the highest authority in the world can adopt them,” Qatar Prime Minister Hamad Bin Jasim Bin Jaber al Thani said in an interview with Al Jazeera television yesterday.

Russia provides both political support and arms to Syria. Russia and China, veto-wielding members of the Security Council, blocked a European-led Oct. 4 attempt to sanction Syria in response to the regime’s crackdown on protesters.

Russian Stance

The draft resolution was produced during discussions between the U.K., U.S., France and Arab nations, as Russia indicated its growing frustration with Assad.

“It’s big if the Russians sign on to it,” said Andrew Tabler, a Syria analyst at the Washington Institute for Near East Policy, a research group.

The first response from Russia was not encouraging. Foreign Minister Sergei Lavrov, a former Russian ambassador at the UN, said today after meeting in Moscow with his Turkish counterpart that Russia continues to oppose calls for the UN to back sanctions against Syria.

Syria rejected a critical Arab League report and Persian Gulf states decided to withdraw from the league’s observer mission. The league has asked other Arab countries to provide replacements, Egypt’s state-run Middle East News Agency reported today. Syria approved the league’s request to extend the monitoring to Feb. 24, the state-run Syrian Arab News Agency reported yesterday.

The Arab League compiled a report after sending observers to Syria on Dec. 26 to ensure Assad stuck to his pledge to withdraw security forces from cities, release political prisoners and allow anti-government demonstrations.

‘Game-Changer’

The league’s plan, approved Jan. 22 in Cairo, calls for the government and opposition to start a dialogue within two weeks and form a national unity government within two months. The draft Security Council resolution notes Arab League sanctions against Syria and encourages other countries to follow suit.

“I hope it will be a game-changer,” said Peter Wittig, Germany’s ambassador to the UN. “It remains to be seen, first of all, if we can agree and if we can recover unity here in the Council.”

Among the 15 member countries on the Security Council, the U.S. and the Europeans represented by the U.K., France, Portugal and Germany favor a resolution with sanctions. In the opposing camp Russia is joined by China, South Africa, India and Brazil.

‘Open the Door’

“If approved, it would open the door to putting UN sanctions on Syria,” Tabler said in an interview yesterday.

The Qatari Prime Minister told Doha-based Al Jazeera that Arab countries “didn’t ask the United Nations for a military intervention. We only ask it to adopt and support the Arab decisions.”

Russia has been wary of any UN-backed use of military action, such as the operation that eventually helped topple Libyan leader Muammar Qaddafi.

Yesterday, Kremlin envoy to Africa and the Middle East Mikhail Margelov said Russia is losing confidence in the possibility of a negotiated outcome in Syria. Assad hasn’t responded to efforts to promote a peaceful solution to the 10- month-old unrest, Margelov said in a telephone interview.

“We don’t see any willingness, either from the authorities or the protesters, to reach an agreement,” Margelov said.

Russia presented its own UN draft resolution earlier that demanded all parties immediately stop the violence. Secretary of State Hillary Clinton was among the leaders who criticized the document for its seeming parity between the regime and protesters.

Russian Resistance

Officials at the U.S. Mission to the UN had no comment.

The new UN draft calls on all sides to halt attacks. Even so, Jon Alterman, who directs the Middle East Program at Washington’s Center for Strategic and International Studies, said it remains unlikely that Russia will back the draft resolution.

“It’s hard to imagine either the Chinese or Russians signing on to this,” Alterman said.

He cited the two countries’ ties to Syria and their concerns that Iran, a close Syrian ally, would become isolated if the Assad regime were toppled.

The U.K., France and the U.S. are trying to arrange briefings by the Qatari prime minister and the Arab League president for the 15-member Security Council, according to the UN diplomat, who spoke on condition of anonymity because the talks are private.

Even if the resolution does get approval, “it won’t stop the killing,” Tabler said.

–With assistance from Nadeem Hamid in Washington, Massoud Derhally in Beirut and Henry Meyer in Moscow. Editors: Digby Lidstone, Louis Meixler

To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net Flavia Krause-Jackson at the United Nations at fjackson@bloomberg.net [Read More]

The Afghan government has announced plans for President Hamid Karzai to meet with members of the Taliban in Saudi Arabia. Many are heralding the announcement as a potential breakthrough because the Taliban has thus far refused to recognize Mr. Karzai’s government.
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However, news of the meeting in Saudi Arabia comes weeks after the Taliban agreed to open an office in Qatar and has raised some concern that Karzai could create the appearance of a disjointed negotiation effort that could undermine peace efforts and threaten relations between the Afghans and the West.

“The Afghan side is worried about not having a complete role, and the Afghan government is suspicious of Qatar,” says Farouk Merani, an independent political analyst. “I think the Afghan government is trying to secure its own interests.”

PHOTO GALLERY Talking to the Taliban

There was already tension between Western and Afghan officials when news broke last month that NATO was negotiating with the Taliban to create a political office in Qatar and had not consulted Karzai’s government. In response, Karzai pulled the Afghan ambassador from Doha in December.

US and NATO officials made efforts to address Afghan concerns about exclusion from the peace process and planning for the Qatar office continued. Still, such discord may confuse future talks with lingering questions of whether Afghan and Western officials are working together.

“Karzai is trying to give an impression that he is in contact with the Taliban, the Americans are trying to give the same impression, but the real Taliban who are fighting under Mullah Omar, they are very clever, they don’t trust the Pakistani establishment, they don’t trust Karzai, and they don’t trust the Americans,” says Hamid Mir, a Pakistani journalist and independent analyst. “Yes, they are ready to negotiate with the United States, but they want to negotiate directly, not through Pakistan and not through Karzai.”

Among the Taliban, the main focus of talks will likely be trying to broker a deal for the withdrawal of all foreign military bases from Afghanistan. Forging a coalition government with Karzai is less likely to be a draw for the Taliban, thus there is little need for the president at talks, adds Mr. Mir.

Among Afghans involved in the peace process, many say it is dangerous to read too deeply into Karzai’s forthcoming trip to Saudi Arabia to speak with the Taliban.

“These are the talks, and they are under one name. If they are in Qatar or Saudi Arabia they’re still negotiations. I believe the people who might meet Karzai in Saudi Arabia are the same people who are sitting in Qatar. They are the political people who are responsible for talking to anyone,” says Haji Musa Hotec, a member of the Afghan High Peace Council who served as deputy minister of planning during the Taliban’s rule. “There were concerns when the talks were going on secretly between America and the Taliban. But after the Americans gave us our share and asked us to work with them, our concerns have gone.”

Adding yet another layer of complication, there are questions about whether the Taliban’s political representatives being sent to Qatar truly represent the interests of the group’s leader, Mullah Mohammed Omar. Specifically, there is some distance between the Taliban’s leadership in Pakistan and the front-line commanders, especially after US forces decimated the ranks of mid-level commanders who moved between the two groups. [Read more]

The Gulf region’s second-largest airline has “identified” a target or targets as it looks for takeover prospects, Al Baker said in a briefing at the Bahrain Air Show.

“We need to look at every business opportunity we can get,” Al Baker said of prospects in Europe. “I just want to make sure Qatar Airways grows in a very sustained environment.”

Qatar Air is also interested in investing in India, though overseas carriers currently face hurdles that make such a move impractical, the executive said.

“The climate for airlines to invest in India should be conducive to proper business processes,” he said. “We will not go to India just to be a partner — we are going to help them become more profitable, to get further investment, further capital, but then we also need to have return.”
[Read More]

To run until Feb. 12 the event will feature competitions in five sports namely athletics, archery, table tennis, volleyball and basketball and staged under the patronage of Sheikha Jawaher Bint Mohammed Al Qassimi, chairperson of both the Sharjah Ladies the Supreme Council for Family Affairs and wife of the ruler of Sharjah.

Seeing action in the 11-day competition are 520 women athletes representing 16 clubs and 12 countries: Egypt, Iraq, Syria, Palestine, Jordan, Yemen, Tunisia, Qatar, Bahrain, Kuwait, Morocco, and host UAE.

Bahrain’s Sheikha Hayat Al Khalifa, president of the supervision committee of the Union of the Arab National Olympic Committees at the AWST and president of the Bahrain’s Women Sports Committee said, “ Sheikha Jawaher has been a great supporter of UAE and GCC countries’ women entering the field of sports and had her first initiative around 12 years ago. Now she wanted to take it further by expanding it and opening the door for all Arab women through this tournament.”

Hayat said having such tournaments will hopefully ensure clubs support and provide their women athletes with the required plan to compete with the best possible performance since the competition is strong and include a large number of countries from different continents.

Jawaher met with chairperson of the steering committee for the GCC women sports Sheikha Naeema Al Sabah of Kuwait and myself to discuss the idea last year, which thanks to the UANOC was welcomed by the members and delegations during the assembly meeting held in Doha during the 12th Arab Games 2011,” said Hayat.

This tournament according to the UANOC members has a unique feature as it is being held in the Gulf and specifically in a very conservative city such as Sharjah and with the attendance of women only except for mediamen, coaches, and referees out of respect for the city’s tradition and culture. It will be aired live though on TV.

To ensure the development, and though most of the women teams in the Arab region has only one team, Hayat said they are aiming at launching a new version of the Arab Games for youth, to be held two years before the original Arab Games to ensure we have both youth and first women national teams prepared. “It’s all about having the right strategy and this is what we are aiming at,” she said.

In addition, women sports seems to enjoy huge support this year especially after the success women delivered at the 12 Arab Games which also witnessed a higher percentage of participation. Almost 50 percent of the women that attended took home medals while only 24 percent of the men won medals.

According to Hayat, women are showing impressive performance one event after the other despite the political issues in the region.

The AWST will be held every four years according to a member of the higher organising committee and director of the tournament Nada Al-Naqbi.

Khalid Al-Hussain, AWST organising committee representative, said the event will be conducted in a professional manner and athletes to undergo drug tests as mandated by the World Anti-doping Agency. [Read More]

In the first week of February, the Qatar Marine Sports Federation (QMSF) under the presidency of HE Sheikh Hassan bin Jabor Al Thani will host UIM Class 1 World Powerboat Championship from 2-4 February 2012.

Also February will features a series of events, including, Commercialbank Qatar Masters presented by Dolphin Energy from 2-5 February.

Under the chairman of Mr. Khaleel Al-Mohannadi, the Qatar Table-Tennis Association (QTTA) made all arrangements to host the 16th International juniors table-tennis championship, likewise, the Qatar Fencing Federation (QFF) is ready to orgainse 2012 Qatar Fencing Grand Prix for Men and World Cup for women from 10-13 February.

In other field, the Qatar Sailing and Rowing federation (QSRF) is organising Qatar Sailing Open championship from 11-15 February 2012.

The Qatar Tennis Federation (QTF) chaired by Mr. Nasser Ghanim Al-Khelaifi completed all managerial and technical preparations to host Qatar Total Open from 13-19 February where top players competing for the trophy and a share of the multi-million dollar prize money.

As a main event, Qatar is all set to celebrate the country’s Sports Day on Tuesday, 14 February 2012. National Sports Day is a pioneer initiative adopted by HH Sheikh Tamim bin Hamad Al Thani, the Deputy Emir and Heir Apparent who issued the Emiri Decree No. 80 for the year 2011 on 06 December 2011, naming Tuesday in the second week of February each year as the State ’s National Sports Day.

Several sport events including, public marches at Cornish and Aspire Dome playgrounds beside other events are scheduled for this day amid the participation of all government and non-government institutions.

The Qatar is considered as the first nation at both regional and world levels to celebrate the sports day, which reflects the profound concern given by the leadership to the sport and health. [Read More]