Qatar's Budget a solid financial roadmap for 2023

The 2023 budget of Qatar was commended by sectoral heads as a solid financial road map to steer the economy towards excellence as the year unfolds.

The financial plan for 2023 has been applauded for prioritising expenditure and aiming at a noteworthy budget surplus during the year.

A noteworthy feature of the budget 2023 according to industry experts is the allocation for the health and education sectors which has been increased for the current year in line with the state’s continued focus on the two sectors. 

The measures to develop a number of new schools and improve school facilities in addition to a number of new and existing hospitals and healthcare centres were commended by sector officials.

Spending on healthcare in the 2023 budget is estimated at QR21.1bn compared to QR20bn in 2022 which is 11 percent of the total budget while spending on the education sector has been estimated at QR18bn compared to QR17.8bn in 2022 or nine percent of the total budget.

The efforts to ensure a dignified life and an advanced standard of living for all Qatari citizens  by raising salaries by QR4bn compared to last year following  H H the Amir Sheikh Tamim bin Hamad Al-Thani’s decision to  raise pension for retirees has been praised by the business community.

Spending on salaries and wages to be increased this year while slashing expenditures on major projects is a salient feature of the financial plan for the year.

Spending on salaries and wages will increase by QR4bn (6.3percent) compared to 2022 which s estimated at QR62.5bn. Spending will cover grants, allowances and retirement based on the recent pension plan which sets a minimum age and period of service.

The plan to implement 22 new projects this year at a total cost of QR9.8bn is another remarkable aspect of the 2023 budget.

The volume of planned expenditures decreased by 2.6 percent this year against last year at QR199bn is another highlight of the budget. Allocations for major projects this year will decline by 13.6 percent compared to 2022 estimated at QR63.9bn with the completion of several infrastructure and strategic projects the latest of which is the expansion of Hamad International Airport prior to the start of the FIFA World Cup 2022.

Public projects 

The continued high spending on public projects is also attributed to the State’s plans to compete and finalise infrastructure projects especially those related to existing and new citizens’ lands as well as projects supporting the local economy.

The Korea Trade-Investment Promotion Agency (KOTRA) hailed the 2023 Budget of Qatar which has provided a clear direction on which the State would traverse during the current year to achieve economic excellence.

Director General of KOTRA in Doha Hanseung Kim said the 2023 Budget of Qatar has prioritised spending on vital sectors of the economy which would help accelerated economic development of the country in the new year.

“I appreciated the steps proposed in the 2023 budget of Qatar. The budget is very promising. In this budget, the government has prioritized its spending for the education and health care systems. This would help the overall development of the country with a long term positive impact,” Kim said.

He added, “It is the role of KOTRA to cater to the rising needs of Qatar by providing best in class products and services from Korea. We will look at all possibilities to ensure that the best technology and services are made available to Qatar.”

Minister of Finance H E Ali bin Ahmed Al Kuwari presented the 2023 Budget last month which estimated revenue for the fiscal year 2023 to be at QR228bn, a 16.3 percent increase compared to the 2022 budget estimates, the expenditure to reach QR199bn and a budget surplus of QR29bn. 

H E Ali bin Ahmed Al Kuwari, Minister of Finance 

The Minister of Finance attributed the increase in public revenues mainly to the adoption of an average oil price of $ 65 per barrel for 2023 instead of $55 per barrel in the 2022 budget, due to the remarkable recovery in global energy prices during 2022, in addition, that the international institutions’ estimates suggest that the energy prices will continue to rise over the medium term.

The general budget estimates spending at QR199bn ($54.6bn), a 2.6 percent decline from the general budget for 2022.

The general budget was based on an oil price of $65 per barrel, a conservative figure adopted by the Ministry of Finance as part of its strategy to allocate financial resources towards existing commitments expected during the year and to fund national development strategy programs and projects.

This increase is a result of the remarkable recovery in global energy prices during the past year, in addition to energy prices, which International Financial Institutions (!Fis) estimate will continue to rise in the medium term. Estimates of total oil and gas revenues for the current year are estimated at QR186bn compared to QR154bn for 2022, which represents an increase of 20.8 percent.

The Minister of Finance revealed that the increase in estimated revenues for 2023, in addition to the limited decline in expenditures, both have shifted the budget balance from a deficit to a surplus estimated at QR29bn. 

The Minister added that the Ministry of Finance will work to enhance the State’s financial reserves by transferring the surplus to the general reserve account in accordance with the provisions of the State Financial System, no. 2 of 2015.

The Minister also pointed out that non-oil revenues for 2023 remain stable compared to the 2022 budget, estimated at QR42bn. The Minister said that the Ministry of Finance is currently working in coordination with the relevant authorities to follow up on the implementation of some measures that would increase non-oil revenues during 2023.

Some of these measures include expanding the list of goods covered by the excise tax and reviewing some government fees. Estimates of revenues resulting from the possible implementation of these measures during 2023 were not added to the budget based in line with the Ministry’s conservative approach to public revenues estimates.

According to him spending on salaries and wages will increase in 2023 while spending on major projects will decline. Spending on salaries and wages will increase by QR4bn (6.3 percent) compared to 2022, which is estimated at QR62.5bn.

This increase, he added, is caused by higher rates of public sector employment for 2023, prompted by the new government structure approved by His Highness the Amir towards the end of 2021. Spending will also cover grants, allowances and retirement based on the recent pension plan, which sets a minimum age and period of service.

Allocations for operating expenses will decline, primarily due to the high costs of sustaining public utilities and infrastructure. This will have an important impact on the post-World Cup phase, in light of the integrated infrastructure that is fundamental to the development and prosperity of the local economy.

The continued high spending on public projects is also attributed to the State’s plans to complete and finalise infrastructure projects, especially those related to existing and new citizens’ lands as well as projects supporting the local economy.

Priority sectors Allocations for the health and education sectors will increase during 2023, in line with the State’s continued focus on these two sectors. This includes, as announced by the Minister of Finance, the development of a number of new schools and the improvement of school facilities, in addition to a number of new and existing hospitals and healthcare centres. Spending on health in the next year’s budget is estimated at QR21.1bn, compared to QR20bn in 2022, which constitutes 11 percent of the total budget. Spending for the education and higher education sector, meanwhile, is estimated at QR18bn, compared to QR17.8bn in the 2022 budget, or 9 percent of the total budget.

On the other hand, spending on the culture and sports sector is estimated at QR9.3bn, compared to QR16.6bn in the 2022 budget, or 5 percent of the total budget. 

The decline in spending on the culture and sports sector is attributed to finalising all projects tied to the hosting of the FIFA World Cup Qatar 2022 and related expenses. In this context, His Excellency indicated that the assets already developed and currently available still give the State of Qatar an advantage when presented with an opportunity to host other sporting events and would contribute to realising the State’s goal of becoming a global sports hub.

Government debt Public debt decreased from 58 percent in 2021 to about 44.5 percent of GDP, as a result of the State’s commitment to paying due external debt, in addition to the growth in GDP at current prices.

The rise in energy prices and the Qatar’s conservative fiscal policy (spending control and reducing levels of public debt, especially external debt) have improved the State’s credit rating.

Credit rating 

His Excellency revealed that the credit rating company known as Moody’s had raised Qatar’s outlook from stable to positive, while Standard & Poor’s had raised the country’s credit rating from (AA-) to (AA), with a stable outlook. The country’s credit rating, His Excellency said, reaffirms financial stability as well as a strong and flexible local economy, both of which attract foreign investments and help reduce the cost of borrowing.

The State of Qatar’s general budget for the fiscal year 2023 showed QR199bn expenditure estimates and a QR29bn surplus being directed to pay public debt, support the reserves of the Qatar Central Bank (QCB) and increase the capital of Qatar Investment Authority (QIA), a move that reflected the country’s keenness to stimulate and diversify its economy.

Qatar’s budget surplus, the highest in the last decade, was ascribed to a 20.8 percent increase in oil revenues with average oil prices having risen to $65 a barrel, prompting an 16.3 percent increase in total revenues, compared to the 2022 budget, as well as a 2.6 percent expenditure decrease with a stop in the country’s expenses for the FIFA World Cup Qatar 2022.

Comparing the estimated and actual surplus and deficit data in Qatar’s budgets over the past 10 years showed maximum estimated and actual deficits in the fiscal year 2016 with QR -46.5bn (estimated) and QR-50.8bn (actual), QR -28.3bn (estimated) and QR-44.7bn (actual) in 2017. The surplus amounted to QR4.3bn (estimated) and QR 7bn (actual) in 2019, while the surplus shifted in the fiscal year 2014-2015 from QR12.8bn (estimated) to a QR-4.2bn deficit (actual), and from 0.5bn (estimated) in 2020 to QR-10.4bn (actual), and the deficit turned from QR-28.1bn (estimated) in 2018 to a surplus of QR15bn (actual), and QR-34.6bn (estimated) to QR1.6bn (actual) in 2021.

The 2023 budget shows that 22 new projects with a total of QR9.8bn will be launched as part of the country’s scheduled QR64bn expenditure of the general budget on major projects for the next year. Of these projects, 14 projects, estimated at QR5.5bn, are based on an assessment of priorities and QR4.3bn eight projects.

Operating expenditure 

The increase in operating expenditure allocations in the new budget is attributed to the public utilities and infrastructure sustainability, which will have an important role in the post-World Cup phase, with the country having built an integrated infrastructure that will be a fundamental pillar for the development and prosperity of the local economy.

Minister of Finance H E Ali bin Ahmed Al Kuwari said that financial resources were allocated for existing commitments, programs and projects of the third national development strategy, and the approved infrastructure projects, especially those related to the development of existing and new citizens’ land plots. 

The Minister revealed that the country would continue plan to raise the expenditure efficiency and allocate financial resources to reduce government debt.

The 2023 budget showed total allocations for salaries and wages, current expenditures and incidental expenses recording 31 percent, 34 percent and 3 percent versus 29 percent, 33 percent and 2 percent in the 2022 budget, while capital expenditures decreased to 32 percent from 36 percent in 2022.

In an exclusive statement to Qatar News Agency, economist and financial analyst Ahmed Akl outlined that the reduction of expenditure on the capital projects and the decrease in allocations were owing to the success of projects that have been implemented in the previous periods, along with their transition to the ample operational stages for the country’s needs during this period, albeit what has been implemented prior to the launch of the world cup 2022 was a station on the final way to attain Qatar 2030 requirements, which is the largest and the most comprehensive vision.

He clarified that one of the most important features of the new budget is the existence of a surplus against a deficit that existed in the 2022 budget, adding that this surplus is partially due to the adoption of an expected price of a barrel of oil at USD 65, compared to USD 55 for the year 2022, which resulted in an increase in the expected oil revenues from QAR154bn in the current year to QAR186bn in 2023.

Akl stated that the second feature within the features of this budget is based on maintaining a level of spending very close to its level in 2022, despite the end of the most important event in the State of Qatar represented in the FIFA World Cup Qatar 2022, and the accomplishment of several major projects, indicating that maintaining the same levels of spending is very positive and encouraging for the markets, and will have a crucial and direct impact on financial markets, and the economic, trade and investment movement in general.

Budget expenses 

He pointed out that the substantial spending on the health and educational sectors with roughly 20 percent from the total budget expenses primarily reflects the state’s persistent orientation towards investment in the human cadre, where part of the new budget has been allocated to expand and develop schools and educational institutions, in addition to further vital projects in the area of developing the health care, and expansion of the health facilities approved for the next year as one of the absolute priorities of the new budget. 

The economist and financial analyst noted that the reference price for a barrel of oil in the new budget at USD 65 remains based on the projections from numerous consulting firms and global banks, which is considered an excellent price in light of the current circumstances, and safe in view of the expectations of a recovery in the global energy markets, and the return of oil prices to rise, adding that it is true that sometimes it may be less or more at the level of the year as a whole. According to his estimation, it will be acceptable and capable of facing shocks, especially in the coming period of the year 2023, and the return of the global economy to expand again.

Commenting on the impact of raising the interest price on the oil prices in general, the economist and financial analyst Ahmed Akl said that he is aware of the fact that a rise in the interest prices is an additional strength to the dollar, which implies a pressure on the level of oil prices, he explained, adding that the current situation is unusual and exceptional, because the reduction in oil prices or putting pressure on it is not only due to the strength of the dollar and the high interest rates, but also to the scarcity of supply, Russian-Ukrainian war, in addition to an upcoming harsh winter, in which the demand for oil is predicted to dramatically increase. The reopening of major global factories and economies, such as the Chinese economy and others is yet another factor, he added.