close

policy

We would like to invite you to continue a survey you have started. ...

Do you trust your insurer ?

Strongly agree
Agree
Disagree
Strongly disagree
Insurance provides peace of mind
Insurance is purchased only when compulsory
Terms and Conditions (small print) are clear and easily accessible
Insurance jargon (language) stands in the way of fully understanding each policy
Insurance companies try their best to uphold the details of the policy without cutting corners
Reducing risk, cutting costs and profits are more important to an insurance company than the customer
Insurance companies in the region are as professional as in other more developed markets
Gender
Age group
Do you feel your insurance provider works in your interest?
Have you had a rejected claim that you feel was not justified?
Do you trust your insurance provider?
Our Network

Register for our free newsletter

 
 
Latest News

New Qatar spending rules aim to avoid state debt overload

All eyes on Qatar

With a population of just 2.1 million, Qatar envisages investing about $140 billion over the next decade.

0

November 6, 2013 2:24 by



State-owned companies in Qatar must now seek approval from the Ministry of Finance before undertaking any borrowing activity, banking sources said on Tuesday, as the state looks to avoid unsustainable debt levels in a rush for growth.

The new guidelines aim to add more centralised control to the borrowing process at a time when the country is spending billions of dollars to develop its infrastructure and prepare to host the 2022 World Cup.

With a population of just 2.1 million, Qatar envisages investing about $140 billion over the next decade on a rail system, a new airport, a seaport, and hundreds of kilometres of major new roads in addition to stadiums for the soccer tournament.

If it is not managed carefully, the spending could destabilise the economy by inflating real estate prices and saddling companies with excessive debt, conceivably leading to the kind of crash which hit Dubai in 2009-2010.

“When you have a lot of government-related entities borrowing simultaneously there can be an issue with coordination and build-up of contingent liabilities that, as we’ve seen, can really hurt the lending banks,” said Khalid Howladar, banking analyst at Moody’s Investors Service, referring to the experience of the United Arab Emirates.

“Any additional financial discipline and transparency around the overall debt build-up is positive, particularly in light of Qatar’s spending plans and the role of the local and regional banks in funding these projects.”

Qatari companies with a “significant” government shareholding must now obtain the ministry’s approval for all exposures that create a potential obligation, including loans from banks, bond issues, derivatives trades and hedges, the sources said, speaking on condition of anonymity as they were not authorised to talk to media.

There was no definition for what constitutes “significant”. Senior Qatari officials could not be contacted on Tuesday to discuss the rules, contained in a circular from the ministry sent out in late October.

Qatar Petroleum (QP), the state-owned energy firm, and its subsidiaries are excluded from the order, which the bankers attributed to its huge cash-generating ability.

The oil and gas sector generated over half of Qatar’s gross domestic product in 2012, according to the Qatar Statistics Authority. QP controls the infrastructure, either wholly or through majority stakes in joint ventures with international energy firms.

While growth of total bank lending in Qatar fell in September to its lowest level since May 2011, it was still high by international standards at 13 percent year-on-year, according to central bank data.

Qatari banks have largely avoided the billions of dollars of loan loss provisions which banks in the UAE have had to make in the last few years, thanks to government support including purchases of real estate assets.

However, they haven’t been immune to problems – Commercial Bank of Qatar, the second-largest lender by assets, posted falls in net profit in the last two quarters because of higher provisions, including one on a domestic real estate loan.

Some other countries in the Gulf have taken steps resembling Qatar’s since the global financial crisis. Abu Dhabi set up a debt management office to coordinate borrowing by government-related entities after the crisis in neighbouring Dubai, which resulted in a $20 billion bailout and massive debt restructurings at state-linked entities.



0

Tags: , ,

Leave a Comment