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Qatar government debt rises to 33 percent of nominal GDP

By Satish Kanady Thursday, 28 June 2012
DOHA: Driven by a rise in external borrowing, the Qatari government debt rose to QR209.3bn excluding guarantees in the financial year 2011/13. The figure is estimated at 33.1 percent of nominal GDP.

External debt includes medium- to long-term foreign currency sovereign bond issue and loans from foreign banks.

The government sold $5bn of such bonds in November 2011 - the first global issue since it tapped the international market in November 2009 - to help finance the Barzan gas project. In US dollars, external debt climbed to $24.1bn in 2011/12, equivalent to 13.9 percent of GDP. External borrowing has also been used to meet obligations falling due on oil and gas investments.

The terms of payment and maturity of external debt are broadly long term, ranging from four to 30 years, Qatar Economic Outlook (QEO) 2012-13 noted.

The government's outstanding domestic debt remained stable at the end of 2011/12 at an estimated QR121.5bn, or 12.9 percent of GDP. Domestic debt consists of medium- to long-term riyal-denominated sovereign bonds issued by the government, medium-term loans from local commercial banks and Islamic Murabaha.

Treasury bills are also included in the local currency debt estimates. To develop the capital market further, the government again issued local currency bonds to banks in January 2011.

Total government debt does not include guaranteed borrowings of semi-government institutions and enterprises. According to QEO, information on this is hard to secure. However, data from the Bank of International Settlements show that international debt securities issued by financial institutions and corporations in Qatar have steadily increased in the last five years.

On Qatar's international debt securities, the QEO noted the country's issuance of foreign debt securities has steadily increased in the last five years, with much of the rise seen since 2009. By end-2011, the government, Qatari financial institutions and Qatar corporate had issued $37.5bn-worth debt securities. These securities, as recorded by the Bank for International Settlements, are entirely long-term bonds and notes.

Corporations accounted for much of the share before 2009, but government has since become prominent. In 2011, it accounted for 45.3 percent, followed by Qatari financial institutions, with 36.0 percent. In early 2012, many local banks announced plans to tap the international capital markets later in the year. Total investment income receipts are estimate at QR22.4bn in 2011.

Qatar Central Bank's (QCB) foreign currency reserves stood at $16.7bn at end-2011, down from $31.0bn the previous year. The fall is probably due to fewer inflows seeking arbitrage opportunities following QCB restrictions on deposits that commercial banks could place with it .

The QEO estimates suggest that Qatar's real effective exchange rate (REER) depreciated by 4.0 percent in 2011. This occurred largely because the US dollar lost value against the currencies of Qatar's major trading partners.

REER provides a measure of competitiveness for a country's output in the global market-place. It captures movements in the nominal effective exchange rate and adjusts for differential inflation between Qatar and its trading partners.

© The Peninsula 2012

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