Qatar Debt Dynamics To Remain 'Favourable' In Medium Term: CI
(MENAFN- Gulf Times) Qatar's debt dynamics is slated to remain“favourable” in the medium term with government debt-GDP (gross domestic product) ratio expected to fall to 43.4% by 2026, according to Capital Intelligence (CI), an international credit rating agency.
According to the rating agency's estimates, gross central government debt (including short-term treasury bills and bank overdrafts) is expected to have declined to 46.2% of GDP in 2024, from 48.3% in 2023, reflecting nominal GDP growth and a large primary budget surplus.
As a share of revenues, government debt increased to 162.5% in 2024, from 147.3% in 2023, reflecting the decline in both hydrocarbon and non-hydrocarbon revenues.
While the reliance on hydrocarbon revenues remains a rating constraint, the government has ample leeway to respond to severe fluctuations in hydrocarbon prices given the size of fiscal buffers and the degree of expenditure flexibility, according to CI.
Earlier another credit rating agency Standard and Poor's had said Qatar's average debt-servicing costs are expected to be below 5% of general government revenues by 2027, aided by debt reduction strategies and higher expected earnings related to the North Field Expansion or NFE.
Highlighting that in the recent years, Qatar's authorities have aimed to reduce the level of external debt; S&P had said“we expect this to remain the case, with only partial refinancing of foreign debt coming due.
In 2023, the government repaid about QR27bn (about 3.4% of GDP or gross domestic product) of its debt. In 2024, it expects further debt reduction of about 2% of GDP, partially offset by new debt issuance equivalent of $2.5bn (1.2% of GDP) in May 2024.
In its latest report, the Institute of International Finance, an US-based economic think-tank, had said the aggregate government debt in the Gulf Co-operation Council is expected to be 25.1% of GDP this year compared to 23.1% the previous year. Highlighting that the government's contingent liabilities as moderate; CI said the largest implicit contingent liability for the (Qatar) government was the banking sector.
Total banking sector assets as a share of GDP were“reasonably” high at 252% in 2024.
Although the sector's asset quality is currently good and capital buffers remain strong, banks are exposed to significant lending concentrations (in real estate). Furthermore, banks' reliance on foreign funding (particularly non-resident deposits) is still considered a potential source of risk – with non-resident deposits amounting to 24.6% of GDP in November 2024, compared to a peak of 42.9% in 2021.
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