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Saturday, April 20, 2024 9:41 GMT
Qatar intends to repay US$20 billion in debt by 2021, including more than US$10 billion this year, on top of scheduled maturities as part of strategies to reduce the debt liabilities despite the Covid-19 pandemic challenges, according to Fitch, a global credit rating agency. "This is supported by precautionary fiscal reserves built up through US$34 billion in Eurobond issuances over the past three years," Fitch said, adding "a marked and sustained reduction in government debt towards the 'AA' median is one of the positive sensitivities. With the government's proposed repayment, Qatar's government debt ratio is expected to fall significantly to 59.2% of GDP (gross domestic product) in 2021 and further to 57.9% in the subsequent year compared to a high of 72.5% estimated for this year. It was at 68.4% and 58.9% in 2019 and 2018 respectively.Qatar’s ‘AA-’ ratings reflect a strong sovereign net foreign asset position, one of the world’s highest ratios of GDP per capita and a flexible public finance structure allowing for favorable debt dynamics and a robust response to limit the fiscal impact of the coronavirus pandemic. These strengths are balanced against a high level of debt and exceptionally high contingent liabilities compared with rated peers and heavy hydrocarbon dependence, it said, highlighting that the contingent liabilities are large, in particular stemming from banks, which have assets of more than 200% of GDP and are at risk of potential volatility in external funding conditions.The rating agency estimates that sovereign net foreign assets (reserves plus other government assets less external debt) were about US$240 billion (130% of GDP) in 2019. On the other hand, net external debt is expected to increase to 8.6% and 13.6% of GDP in 2021 and 2022 respectively against the estimated 7.8% for this year and 4.9% in 2019. On the impact of coronavirus, for which a government stimulus package of QR75 billion (US$2.787 billion) or 1%-2% of GDP was apportioned; the report said the non-hydrocarbon sector is expected to contract by 6% in 2020. The weaker hydrocarbon revenue and disruptions to non-hydrocarbon income as a result of coronavirus would lead to low-single-digit deficits in 2020-22, after surpluses in 2018-19, it said, adding the authorities have cut planned spending by 16% for this year, mainly by postponing non-essential development projects.Estimating Qatar’s fiscal break-even oil price to average US$50 per barrel in 2020-2022; Fitch said "under our definition, Qatar’s fiscal balance includes in revenue our estimate of the investment income on government external asset." The other positive sensitivities for the Qatar economy are a substantial improvement in Qatar's external balance sheet and an improvement in structural factors such as reduction in geopolitical risk and substantial reduction in hydrocarbon dependence.