DOHA: With oil prices expecting to go up against the original assumption of Qatari budget for the current fiscal, the QNB Group estimates that the country’s revenue would reach around $74bn during 2013-2014 fiscal.
The Ministry of Economy and Finance in its budget for the fiscal year 2013/14, has assumed an oil price of $65/barrel, the same as last year. On this basis the ministry assumes revenue of $60bn, of which it plans to spend $58bn. However, QNB Group expects oil prices to be higher, averaging $107/barrel for the fiscal period and leading to estimated revenue of around $74bn. 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. However, spending 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.
Therefore, QNB Group estimates that actual government spending will be around $66bn in 2013/14, leaving a budget surplus of $8bn, or around four percent of GDP. QNB analysts estimate that about 30 percent of total expenditure will be on capital projects.
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 defence 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 categorised 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 towards the rail network, roads, real estate, new Doha Port and the expansion of the utilities network.
Qatar Rail is an estimated $35bn project with initial phases set for completion by 2020. It involves a 300km 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 $12bn currently being tendered for 62km of underground structures and 30km of elevated structures.
The road projects are mainly being led by Ashghal, the public works authority, which has two major projects. Firstly, the $14.6bn local roads and drainage programme, mainly upgrading the network of roads in Doha, with completion expected in 2016. Secondly, $8.1bn 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 $1bn with completion expected between this year and 2016.
The $5.5bn Musheireb real estate regeneration project in the centre 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. Health accounts for 18 percent of the 2013/14 capital spending budget.
The Peninsula
