GCC need in­no­va­tive so­lu­tions to keep up cap­i­tal spend­ing: S&P

The Pak Banker - - FRONT PAGE -

Low oil prices will con­strain the amount of fund­ing avail­able to Gulf sov­er­eigns and banks to sup­port the re­gion's sub­stan­tial in­fra­struc­ture bill in com­ing years, ac­cord­ing to rat­ing agency Stan­dard & Poor's. To pay for its in­fra­struc­ture spend­ing, the Gulf coun­tries may have to look at in­no­va­tive forms of fi­nance in the con­text that sov­er­eigns as well as the re­gion's banks will have fewer re­sources at hand to sup­port the in­fra­struc­ture roll-out plan over the next years - es­pe­cially if oil prices de­cline fur­ther or re­main low for longer.

S&P es­ti­mates that Gulf sov­er­eigns' cap­i­tal spend­ing over the next four years will be $480 bil­lion (Dh1.76 bil­lion), of which about 60 to 70 per cent will go to in­fra­struc­ture projects. Gulf govt spend­ing on projects alone in­clud­ing in­fra­struc­ture con­tracts awarded over the pe­riod 2016-2019 could be about $330b. About $50b out of this is ex­pected to be spent on projects will be al­lo­cated specif­i­cally for in­fra­struc­ture.

The dif­fer­ence be­tween es­ti­mates of cap­i­tal spend­ing on projects and pro­ject con­tracts is awarded huge. "We pro­ject a gap as large as $270 bil­lion through 2019 be­tween cap­i­tal spend­ing for projects by Gulf sov­er­eigns and pro­ject con­tracts awarded, and a dif­fer­ence of $50 bil­lion for pro­ject con­tracts awarded in the in­fra­struc­ture sec­tor," said Stan­dard & Poor's credit an­a­lyst Karim Nas­sif.

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