Qatar expected to retire debt using accumulated contingency reserve funds, says Moody’s
October 01 2020 01:04 AM
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Qatar is expected to retire debt using accumulated contingency reserve funds, global rating agency Moody’s said and noted it understands that Qatar’s government has now approved a plan to use $20bn (or 13% of 2020 GDP) to reduce its gross borrowing requirement during 2020-21.
According to Moody’s, Qatar will reduce its debt burden below 50% of GDP from an estimated peak of around 68% of GDP in 2020 through the combination of announced fiscal consolidation measures and a planned debt reduction exercise, which will draw on the government’s accumulated contingency reserves.
Recently, Moody’s affirmed Qatar’s long-term issuer and foreign-currency senior unsecured debt ratings at Aa3 and maintained the stable outlook.
The increase in government debt during 2018-19, prior to the coronavirus shock, Moody’s noted “was exclusively due to the government’s decision to borrow in excess of its budget financing needs.”
Despite small fiscal surpluses in both 2018 and 2019 (averaging 1.6% of GDP) and a very modest external debt repayment schedule ($3bn), the government raised $33.5bn from external borrowing during those two years, including $24bn from large multi-tranche issuances of international bonds.
While this has facilitated a small reduction in domestic debt, Moody’s assumes that most of this borrowing has been saved as part of contingency reserve funds of the Ministry of Finance with the intention to build precautionary buffers and use some of this saving for the repayment of large external maturities ($10.9bn) in 2020 while also taking advantage of favourable external financing conditions.
It is Moody’s understanding that the government has now approved a plan to use $20bn (or 13% of 2020 GDP) of these funds to reduce its gross borrowing requirement during 2020-21, which, in Moody’s baseline scenario, will lead to a reduction of government debt by nearly $11bn by the end of next year and a decline in the debt burden to less than 64% of GDP from more than 68% of GDP in 2020.
Moody’s expects that further debt reduction during 2022-23 will be supported by the return to fiscal surpluses as a result of a continuous gradual recovery in oil prices and the continuation of the government’s fiscal spending restraint.



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