Qatar plans to freeze the price of steel and cement for three years and extend a diesel subsidy as it seeks to tackle near-record inflation, a report said.

States across the world's biggest oil-exporting region, including Qatar, are hampered in their fight against inflation by currency pegs to the ailing dollar, which have driven up import costs and forced them to track US interest rate cuts.

Qatar, the world's biggest exporter of liquefied natural gas, has no plans to revalue its currency or drop its dollar peg in the short to medium term, Prime Minister Sheikh Hamad bin Jassim bin Jabr al-Thani was quoted by Gulf Times as saying.

Instead, it will focus on reducing the burden of inflation on its population through price controls and subsidies, Sheikh Hamad told a meeting of Qatari businesspeople, according to the paper.

'Contractors can now work without having any fears about any price rise in construction materials, namely steel, cement, sand...' Sheikh Hamad said.

'Any future price rise of such materials in the global market will be borne by the state during the three-year freeze,' he said, without giving details.

Sheikh Hamad dismissed speculation that Qatar plans to revalue its currency -- which he told Reuters in February was about 30 percent undervalued. The dollar has tumbled to record troughs against the euro this year.

'We have no short-term or mid-term plans for the revaluation of the riyal or de-pegging from the dollar,' he said.

'Those who think of selling the dollar and buying riyals to capitalise on the difference of exchange rates are wrong.'         
Gulf dollar pegs have been called into question as the economies boom on a more than six-fold rise in oil prices in as many years.

Across the Gulf, governments have tried to offset inflation while defending their pegs by raising bank reserve requirements, raising state employee wages, cutting import duties, boosting subsidies and introducing rental controls.

Qatar agreed this year to freeze all rents signed since the start of 2005 for the next two years. Inflation in Qatar could average 13.8 percent this year -- the highest rate in the Gulf -- a Reuters poll showed last month.

It has raised bank reserve requirements three times since December.

In a further move, the Gulf state will spend about 1.4 billion riyals ($384.6 million) to extend a subsidy on diesel for another year 'because it is very significant in many industries', Qatar Municipal Affairs and Agriculture Minister Sheikh Abdulrahman bin Khalifa al-Thani was quoted as saying at the same meeting. - Reuters