Qatar heading for $8bn surplus

Actual government spending in Qatar is likely to be around $ 66 billion in 2013/14, leaving a budget surplus of $ 8 billion, or around 4 percent of GDP. “We estimate that about 30 percent of total expenditure will be on capital projects,” QNB Group’s analysts remarked in a statement received here. Qatar’s Ministry of Economy and Finance recently released its budget for the fiscal year 2013/14, which runs from April 1 to March 31 of the following year. An oil price assumption of $ 65 per barrel was used, the same as last year, and on this basis the ministry assumes revenue of $ 60 billion, of which it plans to spend $5 8 billion. QNB Group, however, expects oil prices to be considerably higher, averaging $ 107 per barrel for the fiscal period and leading to an estimated revenue of around $ 74 billion. This will leave room for significantly higher spending than planned. Qatar, as with most GCC countries, tends to spend considerably more than budgeted as budgets are based on conservative oil price assumptions. In the fiscal years from 2009/10 to 2011/12, Qatar’s actual spending was, on average, 20 percent more than budgeted. Furthermore, there are indications from recent trade and population data that project activity has been picking up since the end of 2012. The government’s spending growth slowed in early 2012 as it consolidated expenditure plans and adopted a new medium-term budget framework. Spending, however, is now likely to be ramped up as major infrastructure plans are being tendered in order to be completed within the timeframe required for the 2022 World Cup. The largest category of budgeted current spending is government salaries, which accounted for 35 percent of the total in the 2013/14 budget. The remainder is mainly non-salary items for government departments, such as general supplies, external services and debt interest. The largest department is General Administration followed by defense and security, education and health. While capital spending lagged in 2012/13, the current ramp up in projects will lead to an increase of an estimated 29 percent in 2013/14. Capital spending in the budget can be broadly categorized into three areas: infrastructure, education and health. The allocation for infrastructure development went up by 28 percent and it accounts for 54 percent of the capital spending budget. This spending will mainly be directed toward the rail network, roads, real estate, new Doha port and the expansion of the utilities network. Qatar Rail is an estimated $35 billion project with initial phases set for completion by 2020. It involves a 300 km of railways, including passenger and freight, and a metro and light rail network in Doha. The initial phase involves the core elements of the Doha metro and light rail network. There is around $ 12 billion currently being tendered for 62 km of underground structures and 30 km of elevated structures. The road projects are mainly being led by Ashgal, the public works authority, which has two major projects. Firstly, the $ 14.6 billion local roads and drainage program, mainly upgrading the network of roads in Doha, with completion expected in 2016. Secondly, $ 8.1 billion of projects to build the Doha, Lusail and Dukhan highways with completion expected in 2016. There are a number of additional smaller road projects, amounting to over $ 1 billion with completion expected between this year and 2016. The $ 5.5 billion Musheireb real estate regeneration project in the center of Doha will also receive allocations from the government’s capital budget. The development is expected to be completed in 2016 and house over 27,000 residents. It also includes commercial, retail, cultural and entertainment areas. Education accounts for 28 percent of the capital spending allocation. The development of schools will receive a major portion along with other educational facilities such as Qatar Foundation’s Education City project. Although the current $ 7.5 billion expansion phase of Education City is due to reach completion in late 2014, further major expansions are likely. Health accounts for 18 percent of the 2013/14 capital spending budget. This will go toward a number of medical facility expansions, such as Hamad Medical City, health centers and Sidra Medical and Research Center, a teaching and research hospital connected to Education City. Looking ahead, government capital spending is likely to remain at a similar level until around 2017, after which there may be a slight tail off. The current phase of projects has been accelerated in order to be completed ahead of the 2022 World Cup. The bulk of work on the major railway, road and real estate projects is expected to be completed by 2017. Current spending is also likely to continue steady expansion to meet the needs of a growing population. The government is well resourced with minimal debt and is therefore unlikely to face any spending constraints for some time. Government spending is an important driver of nonoil economic growth. As production in the oil and gas sector has peaked for now, growth in the medium term is likely to be driven by non-oil sectors. The large government capital spending plans will also provide opportunities for the private sector, supporting its development and helping to create a sustainable and diversified business environment. Source: Arab News