Qatar budget to increase higher capital spending in 2018| MENAFN.COM

Friday, 03 February 2023 07:40 GMT

Qatar budget to increase higher capital spending in 2018

(MENAFN- Gulf Times) Rising energy prices and efforts to diversify government revenue may see Qatar's 2018 budget swing into surplus, although a deficit has been projected for the next year.

The 2018 budget has taken $45 for a barrel as the conservative oil price, same as that of 2017.

But many analysts expect the oil price to be much higher in 2018.

QNB, which is the largest financial institution in the entire region, has forecast an average oil price around $60 for a barrel in 2018.

Fitch Group company BMI expects crude to average $57 this year and $60 in 2018.

The improvement in global supply-demand conditions, along with heightened geopolitical tensions, pushed prices to a nearly 20% average rise from 2016 levels and to above $60 currently, their highest levels in two years.

With a planned spending of QR203.2bn in 2018 and expected revenue of QR175.1bn, the budget projects a deficit of QR28.1bn next year. However, this will be 1.1% lower than the estimated QR28.4bn budget deficit in 2017.

The deficit will be financed through the issuance of debt. Covering budget shortfall through debt issuance makes sense, analysts at BMI say, and point out this is because borrowing costs remain lower than the return on investment lost by drawing down reserves.

Qatar's debt burden is still low on a global comparison, amounting to 45.9% of gross domestic product as at end-2016, allowing the country to space its borrowing without risking deterioration in its sovereign profile.

The government has already made it clear that the country's private sector will be actively involved in the implementation of new projects. Next year's budget has already earmarked new contracts worth QR29bn. Qatar's private companies including SMEs can expect to get involved in these projects.

The budget makes it abundantly clear that capital spending will remain high throughout the coming years, fuelled by projects linked to the FIFA World Cup 2020 and the Qatar National Vision 2030 diversification programme.

Key sectors such as health, education and transport along with those related to the 2022 FIFA World Cup will get QR83.5bn, or 41% of the total expenditure.

The 2018 budget also focuses on supporting food security projects, small and medium enterprises and the development of infrastructure in economic and free-trade zones.

The share on spending for major projects (QR93bn) represents nearly 46% of the total expenditure.

The health sector has been allocated QR22.7bn, which represents 11.2% of the total expenditure in 2018.

The education sector has been given an outlay of QR19bn, up 18% on the current year. This will meet the needs of some of the major projects currently underway in the education sector.

Transportation and other infrastructure projects were assigned the largest share in the 2018 budget with allocations of QR42bn, which represents 21% of the total expenditure.


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