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Tue 29 Jan 2008 12:15 PM

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Qatar studying dollar peg - official

Economic advisor to Gulf state's ruler says pegging riyal to one currency has 'many disadvantages'.

Qatar is studying linking its dollar-pegged riyal to a basket of currencies or revaluing it to tame spiralling inflation, an economic adviser to the country's ruler said in remarks published on Tuesday.

But Qatar firstly needed "to have financial institutions which can effectively deal with the repercussions of any such move", the Qatari daily Gulf Times quoted Ibrahim Al-Ibrahim as saying.

"Pegging the riyal to only one currency has many disadvantages, especially if that country adopts monetary policies that clash with ours," he said.

"For that reason, pegging to a basket of currencies is preferred by experts," added Al-Ibrahim, also a member of a committee set up by the state to look into ways to curb inflation.

Inflation could accelerate to 14.5% this year from 14% in 2007, Merrill Lynch & Company said in a report this week.

No timeframe has been set for the move as de-pegging or revaluing the currency are "problematic issues", Al-Ibrahim said.

Gulf Arab countries except Kuwait peg their currencies to the weak US dollar, which forces the oil producers to track US monetary policy at a time when the Federal Reserve is cutting interest rates to stimulate the economy.

Qatar's government was considering increasing salaries and subsidising food, he said, without giving further details.

Qatar's population has almost doubled since 2004 to about 1.5 million, according to Al-Ibrahim, who is also chairman of the General Secretariat for Development Planning.

The surge comes from an increase in the country's army of guest workers mainly from the Indian subcontinent and other Arab countries. (Reuters)

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