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Mon 28 Jul 2014 10:56 AM

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Qatar's state spending growth slows to 11-year low

New data suggests government has begun reining in excesses of the previous four years despite rise in infrastructure investment

Qatar's state spending growth slows to 11-year low
Qatar flag

Qatar's state spending increased 12.7 percent last fiscal year, the lowest rate in 11 years, as slow growth in current expenditure offset a sharp rise in funds spent on infrastructure projects, data has showed.

Expenditure rose to a record high of QR231.7 billion ($63.6 billion) in the year that ended in March, from 205.6 billion riyals in 2012/13, preliminary finance ministry data released by the central bank showed.

Last year's spending was 10 percent more than initially planned. But the margin by which actual spending overshot the plan was the lowest in five years, suggesting the government has begun reining in excesses of the previous four years, when on average it spent almost a quarter more than originally planned.

Doha also seems to have accelerated work on infrastructure projects worth roughly $210 billion that it plans over the next decade or so, many of them related to Qatar's hosting of the 2022 soccer World Cup.

Project spending soared 32.7 percent to QR68.4 billion last fiscal year, compared with growth of just 1.9 percent in the previous year.

Difficulties in planning and logistics, as well as bureaucratic obstacles, delayed project spending in the past. Qatar has now scaled down or divided into phases some big-ticket projects, such as a metro, a port and airport facilities, to reduce economic overcapacity risks.

Current expenditure rose 6.0 percent to QR163.2 billion in 2013/14, a sharp slowdown from a 24.4 percent jump in each of the previous two years, because of a drop in interest payments and spending on supplies and services. However, public sector wages kept rising strongly.

State revenue in the world's top liquefied natural gas exporter grew 21.9 percent to a record QR346.6 billion last fiscal year, slower than the 27.8 percent rise in the previous year.

Revenue growth would have slowed further if Qatar Petroleum had not started transferring its entire financial surplus to the government from 2013. Previously, a part went to the government as investment income, part was retained on the company's balance sheet, and part was used to provide fresh capital to the Qatar Investment Authority.

The 2013/14 budget surplus surged to a record QR115.0 billion, or 15.6 percent of gross domestic product, from QR78.8 billion or 11.4 percent of GDP in the previous year.

Analysts polled by Reuters in April forecast Qatar's fiscal surplus would total 7.7 percent of GDP in 2014/15, shrinking to 5.2 percent in the coming fiscal year.

Soaring government spending, combined with flat production of LNG, falling crude oil output from mature fields and lower hydrocarbon prices, may push Qatar's fiscal balance into deficit over the medium term, the International Monetary Fund warned in March.