Huge Qatar public spending narrows budget surplus to $1.4bn

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doha aerial view
An aerial view of Doha, capital of the State of Qatar. Photo - Royal Dutch Shell Media Library

Qatar’s state budget surplus shrunk to 2.9% of quarterly economic output in the third quarter of its 2011/12 fiscal year, amid increased public spending and dropping revenues compared with the previous three months, official data showed on Thursday.

Preliminary estimates published by the central bank showed a surplus of 5.1 billion riyals ($1.4 billion) during Q4 of 2011, down from a huge surplus of 42.2 billion riyals, or 25.6% of gross domestic product (GDP) in the previous quarter.

A Reuters calculation based on official data showed the budget surplus reached 45.1 billion riyals ($12.39bn) during the first three quarters on a cumulative basis, or 7.1% of 2011 GDP.

The government’s target was a surplus of 22.5 billion riyals in the fiscal year, which ended in March, but revenue dropped almost 10% to 55.8 billion riyals ($15.33bn) in October-December from a year earlier, bringing cumulative income for the first three fiscal quarters to 102% of the 2011/12 target. It fell 28% compared with Q3 of the same year.

Government expenditures jumped 62% during the period from a year ago to 50.7 billion riyals ($13.93bn) and met 87% of the full-year target on a cumulative basis, the data showed. Spending surged by 42% from the previous quarter.

Qatar’s economy is expected to slow this year from 14% in 2011 as the impact of two decades of gas output expansion weakened. However, the government plans to boost spending by 27% in the new 2012/13 fiscal year is likely to help keeping it in high single digits.

In its 2011/12 budget, the gas-rich country pencilled in spending worth 139.9 billion riyals ($38.42bn).

Qatar managed to avoid social turmoil in the Middle East by hiking basic salaries and social benefits for state employees by 60% in September, while military staff got 50-120% rises.

International Monetary Fund said in January following annual consultations with Doha that measures were expected to add an estimated $1.6 billion to government expenditure in 2011/12.

Qatari finance ministry assumed an oil price of $55 per barrel in its 2011/12 budget while finalising plans to boost infrastructure spending ahead of hosting the 2022 football World Cup.

The government outlined public investment worth 347 billion riyals ($95.31bn) during the five years to 2016 in its development strategy, with more than $65 billion of that expected to be on infrastructure.

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