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,” 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 $9bn sale last May. Emadi said another issue was an option in the 2017 budget, but no decision had been made on whether to exercise it.
His 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 QAR28.3bn ($7.8bn) from QAR46.5bn 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 QAR198.4bn, 2 per cent lower than the 2016 plan, because of a 9 per cent cut in government operating expenses and a 1.5 per cent fall in the total salary bill.
“We are becoming more efficient on the operating side of the government but we need to do more on investment and the capex side,” Emadi said.
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 $8bn and $9bn of such projects were given to the private sector, he added without elaborating.
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 per cent this year. It will face a drag in 2018 when Qatar, along with other countries in the region, introduces a value-added tax to boost non-oil revenues; Emadi estimated the tax would absorb between 1 and 2 per cent of gross domestic product.
Also, the country’s population, which has been swollen by foreign workers on infrastructure projects, is expected to peak between 2017 and 2019, 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’re trying to do is really prioritise 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.”