Caution matches ambition in Qatar
Qatar’s 2017 budget is realistic on the one hand and ambitious on the other. The projected figures assume strong income gains and lower spending. The realistic notion comes from reducing expenditures further, while the ambitious part relates to the assumption of higher non-oil revenues.
Starting 2016, Qatar abandoned the practice of starting the fiscal year in April. This marks the second time running it started the budgetary time frame in January.
The projected deficit of $7.8 billion is down by nearly 40 per cent from that assumed for 2016. In fact, it was the first such in 15 years, with Qatar enjoying an enviable track record of posting sizeable budgetary surpluses.
The old practice focused on assuming lower than actual market prices for oil, with the fiscal year then ending in stronger treasury income. However, this luxury ended with the plunge of oil prices in 2014.
On a positive note, the authorities intend to finance the budgetary shortages via local and international sources rather than drawing on state reserves. Last May, Qatar succeeded in raising $9 billion from Eurobonds, one of the largest issued by any government in the Middle East. These were issued in three tranches of five-, 10- and 30year maturities.
The smaller deficit partly reflects stronger projected revenues, at $46.7 billion, up by 9 per cent. Nevertheless, the figure is considerably below the $62 billion assumed in fiscal year 2015.
One fresh source for higher revenues concerns new airport fees. In late 2016, the authorities started implementing a fee of nearly $10 on passengers leaving and transiting through Hamad International Airport. Certainly, this fee is on top of existing ones, and designed to make passengers pay for use of airport facilities.
Still, there is the possibility of not being able to generate the projected revenues. The scheme to a degree relies on steady economic growth on the back of spending by public and private sources. Plans could change for unforeseen contingencies and changing priorities due to developments in the oil market. Another challenge relates to capacity building with regards to ensuring smooth flows of non-oil revenues from expatriates. The 2017 budget projects expenditures of $54.5 billion, down by 2 per cent from 2016. Infrastructure expenditures remain steady as the country prepares to host World Cup 2022.
The budget allocates some $11.5 billion, or more than 21 per cent of total expenditure, for infrastructure, including rail development and road networks plus port expansion.
The first phase of Doha Metro is set to be operational in 2019 ahead of the World Cup, with three lines together comprising 37 stations.
Moreover, $6.7 billion is being allocated for the health sector, including completing a hospital for workers in an industrial zone. There will also be $5.7 billion for the educational sector.
Qatar can depend on its extraordinary external financial assets to help bolster the budget, if and when necessary. Qatar’s sovereign wealth fund amounts to $335 billion, considerably above the country’s GDP.
Likewise, Qatar enjoys sovereign credit ratings within the A categories from Moody’s, Standard & Poor’s and Fitch, in turn helpful for issuing bonds. Altogether, the Qatari economy is boosted by being the largest exporter of liquefied natural gas.