Qatar may not issue international bond this year: Minister

08/02/2017 07:18 AST

Pressure on Qatar’s state finances is easing because of higher oil prices and the government may not need to issue an international bond this year, but it is still seeking ways to save money, Finance Minister Ali Sherif Al-Emadi said on Tuesday.

“We may not issue a bond this year given where oil prices are — right now we are close to break-even,” Al-Emadi said in a briefing on the financial outlook for the world’s top liquefied natural gas exporting nation.

Qatar’s last international bond issue was a $9 billion sale last May. Al-Emadi said another issue was an option in the 2017 budget, but no decision had been made on whether to exercise it. He said a new unified value-added tax (VAT) across the Gulf Arab countries could come into effect as early as next year as the oil-rich region searches for new sources of revenue. The minister said that all six members of the Gulf Cooperation Council (GCC) had signed onto the agreement. Al-Emadi says a Jan. 1 implementation date could be delayed a year if countries need more time to prepare. He gave few details, but an earlier framework agreement calls for a 5 percent levy on some goods.

The minister’s comments illustrated how higher oil prices are to varying degrees improving the outlook for oil and gas exporting countries around the Gulf. Brent oil averaged $45 a barrel last year but is now trading around $55.

Qatar’s 2017 budget, announced in mid-December, projected its deficit would shrink to 28.3 billion riyals ($7.8 billion) from 46.5 billion riyals planned for 2016. Since the 2017 budget assumed an average oil price of about $45, the deficit is now close to disappearing, Emadi said.

However, he made clear that an austerity drive would continue. The 2017 budget envisages spending will drop to 198.4 billion riyals, 2 percent lower than the 2016 plan, because of a 9 percent cut in government operating expenses and a 1.5 percent fall in the total salary bill. For the sake of fiscal discipline, Qatar will not use assets from its sovereign wealth fund to fund its deficit, and the government is scaling back state projects which it thinks the private sector can handle instead, he said.

In the past 18 months, between $8 billion and $9 billion of such projects were given to the private sector, he added without elaborating.

Al-Emadi said the government was spending close to half a billion dollars a week on capital projects, focusing on preparations to host the 2022 World Cup soccer tournament. Ninety percent of World Cup projects have been awarded and two-thirds of them will be delivered in the next 24 months, he said.

He predicted Qatar’s economy would grow 3.4 or 3.5 percent this year. Also, the country’s population, which has been swollen by foreign workers on infrastructure projects, is expected to peak between 2017 and 2019, Al-Emadi said.

However, officials believe government projects will underpin growth until the World Cup and are adjusting spending plans to ensure there is no sudden reduction in economic stimulus after 2022.

“What we are trying to do is really prioritize 2022, so we have a good and moderate growth rate...After (2022) it will mainly be infrastructure projects. The airport can have some sort of expansion and part of the rail (network) can have some sort of expansion. We have highways that need to be done after 2022, the sewage system.”

Arab News