Qatar is making hay while the sun shines. Taking advantage of investors' hunger for yield, the Gulf state has just raised $9 billion in the debt markets, the region's biggest ever bond offering and far more than expected. While this will help Doha cope with lower energy prices, trouble is being stored up for the future.
The emirate could easily get by without borrowing. Even in a region known for its prosperity, Qatar is wealthy. Its gross domestic product per capita is four times that of Saudi Arabia, the world's largest oil exporter. And even if the country really needed the money, it could have opted to sell a tiny portion of the assets held by its $334 billion sovereign wealth fund. After all, such war chests were originally created to act as financial buffers against fluctuations in energy prices.
Even better, Qatar's ruler, Sheikh Tamim bin Hamad al-Thani, could have cut back on the lavish spending for which his country is renowned. Despite expecting to post its first budget deficit in 15 years, Doha is pressing on with projects such as its troubled plan to host the World Cup in 2022, which will use up a chunk of the $200-billion infrastructure spending planned through to 2030.
Still, borrowing allows Qatar's rulers to defer the economic and social reforms that are really required. Gradually embarking on the privatisation of the state-owned oil company, Qatar Petroleum, would help improve efficiency. And an overhaul of the labour market, not least to improve conditions for low-paid foreign workers, is long overdue. These are problems which will have to be addressed, later if not sooner.
The emirate could easily get by without borrowing. Even in a region known for its prosperity, Qatar is wealthy. Its gross domestic product per capita is four times that of Saudi Arabia, the world's largest oil exporter. And even if the country really needed the money, it could have opted to sell a tiny portion of the assets held by its $334 billion sovereign wealth fund. After all, such war chests were originally created to act as financial buffers against fluctuations in energy prices.
Even better, Qatar's ruler, Sheikh Tamim bin Hamad al-Thani, could have cut back on the lavish spending for which his country is renowned. Despite expecting to post its first budget deficit in 15 years, Doha is pressing on with projects such as its troubled plan to host the World Cup in 2022, which will use up a chunk of the $200-billion infrastructure spending planned through to 2030.
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Sheikh Tamim, who took office after his father's abdication in 2013, has warned Qataris that the days of government handouts are coming to an end. However, he has made few substantive savings. This year's budget forecasts spending of 202.5 billion riyals ($55.6 billion), compared with 211 billion riyals in the 2013 fiscal year. Granted, this is not a pressing worry. Moody's left Qatar's Aa2 credit rating unchanged earlier in May even as it cut ratings for Saudi Arabia, Oman and Bahrain.
Still, borrowing allows Qatar's rulers to defer the economic and social reforms that are really required. Gradually embarking on the privatisation of the state-owned oil company, Qatar Petroleum, would help improve efficiency. And an overhaul of the labour market, not least to improve conditions for low-paid foreign workers, is long overdue. These are problems which will have to be addressed, later if not sooner.