Qatar’s Emir has passed a new law that grants additional powers to the country’s finance ministry, giving it more control over the nation’s purse strings as part of a push to bring overspending departments in line.
Law No. 2 of 2015 is the latest move by Qatar’s leadership to rein in government expenses amid declining revenues and an infrastructure building boom that’s pushed construction costs up to the highest level in the Gulf.
Qatar Minister of Finance Ali Shareef Al Emadi said the new measures aim to “protect public funds,” according to the country’s state news agency.
“The law would boost the efficiency of public spending by tracking income and expenses accurately and continuously,” the minister said.
While Al Emadi did not provide specifics, QNA states that the new law is also aimed at giving the finance department more flexibility to deal with “economic and financial developments” as well as setting “clear boundaries” between government departments.
The finance minister’s remarks echo comments made by Sheikh Tamim bin Hamad Al Thani to the Shura Council in November:
“Waste, extravagance, mishandling of state funds, lack of respect for the budget, reliance on the availability of money to cover up mistakes are all behaviors that must be disposed of, whether oil prices are high or low.
The new legislation also extends Qatar’s 2014-15 budget to the end of December as the government prepares to move its fiscal year to Jan. 1. The budget has historically ended March 31, but starting in 2016 will mirror businesses and international financial organizations that follow the calendar year.
Better control
The Qatar government has routinely overspent its budget in recent years, but still managed to turn a surplus by making conservative assumptions on the amount of revenue it will collect from energy exports.
However, the dramatic drop in the price of oil – which is correlated to the price of natural gas – has eroded government revenues across the Gulf and prompted some economists to predict that Qatar will run its first budget deficit in more than a decade this year.
While Qatar’s vast financial reserves likely mean it can easily cover a financial shortfall for several years, the expected milestone is prompting some to take a closer look at how the country’s finances are measured.
Speaking to Doha News, a locally-based economist who asked not to be named said:
“In the past, there’s been a lack of oversight (of government) spending. This is part of a general push by the Emir to have better control over public spending across the government and make sure that decisions are made through (the) Ministry of Finance.”
The impact of the new law, and how the finance ministry would exercise its new powers, remains to be seen, particularly in the absence of new detailed spending plans for the coming year.
For his part, Al Emadi said the government would “continue its support” of projects and investments that are already planned and scheduled.
That said, Qatar has reportedly canceled or postponed a raft of non-essential projects over the last year, including the Sharq Crossing in Doha Bay.
Additionally, authorities have in the past year cut the operating budgets of several government-funded institutions, including Qatar Foundation and Qatar Museums.
None of the reductions have been officially communicated by the government. However, Al Emadi said the new law would “ensure transparency and accountability in the handling of public money.”
While it’s not clear what that will entail, the economist who spoke to Doha News said he is expecting to see the finance ministry release more detailed information about spending trends in the months ahead.
Thoughts?
Short of another major global rescission, building costs (material costs mostly) will remain high considering the U.S and China boom. As far as government spending is considered it would be really nice for national peace of mind, though I don’t know how efficient and economical it would be to have the country aim a bit more towards sustainability. More farms, more ground water reserves tapped, less national reliance on gas/oil, less wasteful natural resource spending in general.
More farms means is a lot of money wasted into turning a desert into a farming land. The idea of buying farms in Australia, Sudan and elsewhere to guarantee food security is the best option so far, provided it is properly managed. And it is not a Qatari invention. China, which has already a big farming industry, bought farming lands in Ukraine that are the size of Qatar or even bigger, in order to guarantee its food security. The only thing that Qatar should be doing and is not doing is investing in the next big thing: solar energy. Setting up a world-class university and a research centre dedicated to solar energy, and working towards the goal of having 20 or 30 percent of electricity produced by solar in few years is likely to help Qatar transition towards knowledge economy.
You’re right though we are investing in solar. They’re building a huge plant somewhere so is Saudi, I believe. I’m still unconvinced about food security though. Buying up land in other places is good on paper but it doesn’t mean they can’t just take it back(Something like this happening http://en.wikipedia.org/wiki/Nationalization_of_oil_supplies) . Qatar isn’t China. China is feared by world leaders. Diversification is crucial with food security. Land in many places including back home. There’s a lot of new tech in farming/indoor farming that’s worth a look http://qz.com/295936/toshibas-high-tech-grow-rooms-are-churning-out-lettuce-that-never-needs-washing/
Though how truly efficient it is skeptical and we’re better of waiting a few years for better tech.
I don’t know if we should be a solar energy market though. Patents already exist, tech already exists. It’s a difficult market to penetrate into.
There’s also still the issue of water supplies but I suppose a combo of solar+desalination is viable.
Qatar with its large gas reserves and low cost of extraction should not invest at this time in solar, nuclear etc – it doesn’t need to and there is no financial incentive to do so. Environmental yes but not financial.
Given the budgets cuts, let the other GCC neighbours invest billions in solar, nuclear and let it continue with gas powered energy generation – in another decade or so, the production unit cost of these tech would reduce considerably and then Qatar can invest in them.
Anyways QSTec, qatar solar energy have invested in this industry – they can sell to its GCC neighbours, globally. Perfect.
Good point.
When I say buying up lands for farming, it is usually not buying as we know it. It is more of a long-term lease, whether over a 10-year or 99-year period. Of course there are always risks of instability and government change that might endanger such business plans. I am pretty sure China is not happy with the current turmoil in Ukraine, but that said, this is a risk I assume worth taking, especially for a country like Qatar that imports over 90% of its food. The new farming methods you mentioned are still experimental and might be extremely costly, at least for now. But is also another option worth considering when these technologies mature.
Now talking about solar energy, to be honest, I think it is becoming a very interesting investment after the recent developments that are making it fairly cheap even with an oil barrel at 60-70USD. Two other things that I hope Qatar will invest in as they are also going to disrupt a lot of things and change our lives are drones and 3d printers. Whoever is going to take the lead on these will “lead” the world.
The Americans and the Israelis already lead in drones. I’m not sure about the printers, they seem like the type of technology that no one country can monopolize.
They do lead in military drones. However, for commercial drones, the biggest brands are American/Chinese/South African but nothing Israeli in the Top10. For 3D printing, again Americans are there but recently the Chinese seem to be competing ferociously.
Mmm, I’d argue that the tech is easily replicated everywhere, what will mark the winners is the legal/regulatory environment.
Read this 🙂
http://www.wsj.com/articles/who-builds-the-worlds-most-popular-drones-1415645659
Pay wall
Weird. I opened it earlier but now it is hidden behind a paywall!
Qatar IS investing in solar in its push towards sustainability. You can get all the information you want on Qatar’s solar projects from the QEERI website. You also have companies like QSTec, GreenGulf and the local universities investing in solar energy research.
Not sure how much the natural ground water could be tapped. My understanding was this occurred in Bahrain some years ago and it lead to seawater seeping in.
The price of natural gas sales from Qatar is correlated to the price of oil and not the price of oil is correlated to natural gas
It’s the same. The concept of correlation is symmetric, not uni-directional. The prices of oil and gas are correlated with each other.
Very good initiative. The spending doesn’t matter – if there are higher returns on it. There is lot of technology that can control and monitor spending and give exact ROI’s on the same.
Transparency is the new buzzword. I look forward to the publication of how much public money has been donated to various interested bodies operating in Syria.
Excellent – government entities being prudent while spending. How do they intend to be proactive to curtail unnecessary spending? The MoF and Audit Bureau already have that power……… hmmmm……Appoint a consultant who checks the work of a consultant who checks the work of another consultant…….
Audit Bureau and the Administrative Control and Transparency Authority were supposed to control spending and ensure accountability and transparency. Does the new law transfer such responsibilities to the MoF?