Qatar public expenditures surge despite oil slump

 27 Aug 2017 - 16:09

Qatar public expenditures surge despite oil slump

Satish Kanady | The Peninsula

Despite fall in global oil prices, Qatar’s public expenditure witnessed a remarkable growth in 2016. The country’s public expenditure in the fiscal year witnessed an increase of 11.6 percent compared to the previous year.

The growth was mainly driven by the salaries and wages item, which rose by 53.8 percent to QR57.2bn, compared with QR37.2bn in the previous year. This growth reflects only in part, because the 2015 budget was limited to only nine months. Thus its relative importance to total public expenditure increased to 27.1 percent compared to 19.7 percent in the previous year, Qatar Central Bank’s (QCB) annual report for the year 2016 noted.

However, the current expenditures for the year 2016 witnessed a 20.9 percent decrease and stood at QR56.5bn compared to QR71.4bn in 2015. Qatar’s secondary capital expenditures, a key component of general budget, plunged 87.4 percent to about QR3.9bn from QR30.9bn in the previous fiscal year.

The QCB data suggests an 88.3 percent increase under the ‘main projects’ head in 2016, compared to the previous year. The expenditures jumped to QR93.4bn from QR49.6bn. “Thus the government confirmed its intention to proceed with the implementation of infrastructure projects, especially those related to the hosting of the 2022 World Cup and the realization of Qatar National Vision 2030”, QCB document noted. 

Qatar’s capital and financial account registered surplus of QR13.8bn in 2016, against QR71.6bn deficit registered in the previous year. Developments under this head are mainly due to issuance of bonds abroad and increase in other investments through inter-bank foreign liabilities during the year. The overseas issuance of government bonds amounted to QR32.6bn ($9.0bn) and sukuk through banks amounted to QR8bn.

On the liquidity management, the QCB document said despite the tighter liquidity scenario for the greater part of 2016, the government moved ahead with its infrastructure investment commitments in line with the economic diversification strategy. 

On the one hand, this led to a surge in public sector credit growth as the government expanded its investment activities.  However, the private sector credit slowed down reflecting the tighter liquidity situation. On the other hand, deposit growth during 2016 has been low by historical standards. 

Considering the negative deposit growth, QCB was engaged in a proactive liquidity management by resorting to various instruments such as QMR (Qatar Money Market Rate Standing Facility) system, auctioning of T-bills and T-bonds. The net impact of T-bill auctions during 2016 was injection of short-term liquidity amounting to QR8.4bn. On the other hand, outstanding T-bonds increased to QR103.48bn from QR95.28bn. Thus liquidity amounting to QR8.2bn was absorbed from the system so as to manage long-term liquidity.

T-bill worth QR19.15bn matured during 2016, while T-bills worth QR10.77bn were issued during the year. The outstanding stock of T-bills decreased to QR5.62bn from QR14bn.