Budget Bonanza

Qatar

Economic News

22 Jul 2010
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At QR 65.71bn ($18.1bn), the Qatar 2007-2008 budget, published this month, is the largest in the Gulf state's history. As oil prices remain high and the country's foreign debt declines, Doha is able to significantly increase spending on public projects.



According to the Ministry of Finance, Qatar is expecting a budget surplus of $1.8bn from the 2006-2007 fiscal year, which ended on March 31. The government originally estimated the surplus would be $632m. Revenues are estimated to be $19.9bn for the just-ended fiscal year, an increase of 27% over the previous year.



OPEC data indicate Qatar's crude oil production is about 766,000 barrels per day.



However, Qatar National Bank (QNB) estimated the budget surplus for 2006-2007 might be significantly higher.



Mohamad Moabi, head of economics and research at QNB, told OBG, "From the data we gathered the budget surplus can be placed anywhere between $4bn and $5bn. Given the average price for Qatari crude, $62 per barrel, in 2006-2007 and Qatar's oil production levels, this indicates a surplus that is much higher." QNB's findings indicate Qatari crude prices in the last fiscal budget were 71% higher than the government's nominal $36 per barrel.



Particular emphasis in the latest budget was placed on development and infrastructure projects, with continued investment in health and education. Qatar's economy has tripled in size since 1998, thanks to its burgeoning gas sales.



Minister of Finance, Yousef Hussein Kamal told OBG, "The budget that I announced shows Qatar is always thinking long term. Our plans are for 2012 and beyond, in fact we have to plan for as far away as 2025."



Of the money allocated, the largest portion, $5.7bn, will go to infrastructure upgrade projects such as roads, sewerage, electricity and water. Other projects include plans to improve industrial areas for the benefit of small and medium size businesses, as well as port facilities.



Qatar is continuing its policy of heavy investment in education, with the sector seeing $2.2bn in investment. Part of the money will go to building new schools and educational facilities, which will consume $1.4bn of the allocated funds. Last month, Qatar's public works authority awarded a contract worth $71.2m to Tadmur Contracting Company for the construction of seven schools in Doha and its suburbs.



Health and social services have been allocated $1.36bn. The government has set aside funds to complete the first phase and begin work on the second one at Hamad Medical City and South Hospital. Also on the agenda are the building of new health centres and projects at Hamad Medical Corporation (HMC), Rumaillah Hospital and Al-Shamal Hospital.



One of the challenges facing Qatar is the record inflation rate of 11.8% in 2006, up from 8.8% in 2005. Kamal stated inflation was a by-product of the rapid expansion the country had undergone and 2006 should be the plateau. "When you consider a growth rate of 25%, you will expect some inflation," Kamal told OBG.



According to Qatar's Planning Council, price increases were found in all categories, with rents causing the main inflationary pressures on the market.



The government is working to ease housing capacity issues, with plans to build new housing in an effort to rectify the imbalance and reduce inflation.

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