Qatar to use reserves to pay off debts: Moody’s

By Rahul Vaimal, Associate Editor
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Renowned global rating agency Moody’s understands that Qatar will utilize its accumulated contingency reserve funds to pay off the debt and has now approved a $20 billion plan which would represent 13 percent of its 2020 GDP to reduce the country’s borrowing requirement for 2020-21. 

Qatar is expected to reduce its overall debt burden below 50 percent of its GDP from its peak of close to 68 percent in 2020 through planned fiscal consolidation measures and a systematic debt reduction exercise which will use the government’s accumulated contingency reserves.

Moody’s recently affirmed Qatar’s long-term issuer and foreign-currency senior unsecured debt ratings at Aa3 while maintaining a stable outlook. The agency had earlier remarked that the country’s excessive debt pre-COVID-19 (2018-19) was due to its “decision to borrow in excess of its budget financing needs.”

Qatar’s government engaged in raising $33.5 billion worth external borrowing during those two years (2018 and 2019) which included $24 billion from large multi-tranche issuances of international bonds despite it having small fiscal surpluses averaging as much as 1.6 percent of its GDP and a very modest $3 billion external debt repayment schedule.

Even though the exercise resulted in a small reduction in domestic debt, the global rating agency assumes that most of it was saved by the government towards the Ministry of Finance’s contingency reserve funds with an with the intention to build precautionary buffers and use some of this saving for the repayment of large external maturities ($10.9 billion) in 2020 while also taking advantage of favorable external financing conditions.

Moody’s understands that the Qatar government has now approved a $20 billion plan to reduce its gross borrowing requirement during 2020-21 which is expected to reduce the government debt as much as $11 billion by the end of the year resulting in a decline of overall debt burden percentage to GDP from 68 percent in 2020 to 64 percent.