Additional debt: US bonds Doha’s last hope as Qatar’s economy collapses

Shaimaa Hefzy

Qatar’s fragile economy, which is based on oil exports, has no choice but to resort to debt instruments to bridge its fiscal deficit, but it is staining this with a political nature to win alliances or beg for relations with Western countries in light of the Arab boycott on Doha as a result of its support for terrorism.

Economic pressures

As a result of economic pressures facing Qatar, the pace of foreign and domestic debt has increased at great rates in light of the accumulation of debt burdens year after year in a manner that depletes the country’s wealth.

According to previous estimates of the International Monetary Fund (IMF), Qatar’s proportion of foreign debt as a percentage of GDP jumped to 106.7% at the end of 2019, compared to about 101.1% in the previous year, while it has declined to 98.3% during 2020.

The volume of foreign debt increased in 2019 by 25.34% on an annual basis, estimated at 39.64 billion riyals ($10.99 billion), reaching the highest level ever.

According to data released by the Qatar Central Bank, the country’s foreign debt recorded 196.04 billion riyals ($54.37 billion) last year, compared to 156.40 billion riyals ($43.38 billion) in 2018.

Foreign debt

The data shows there has been a notable jump in Qatar’s foreign debt over the past 16 years by 1,245.41%.

Debt issuances increased during 2019, which caused the government’s local debt to rise to about 133.25 billion riyals ($37 billion), which represents the outstanding balance of bills, bonds and sukuk bonds by the end of 2019.

The outstanding debt was distributed to bonds at a value of 83.7 billion riyals ($23.2 billion dollars), the repayment of which starts from next year and extends until 2029, while the existing balance of Islamic bonds is about 46.5 billion riyals ($12.9 billion), in addition to a balance of bills worth 3 billion riyals ($832 million).

Spiraling debt

Amid its spiraling debt, Qatar has attempted to gain the satisfaction of the United States by increasing its injection of funds into US treasury bonds and bills.

Recent data issued by the US Treasury showed that, since the end of 2019, Qatar has pumped money into buying US bonds and notes at unprecedented levels as a tool to beg the Americans.

US data showed that Qatar’s investments in US bonds and notes amounted to about $4.85 billion until the end of February 2020.

On an annual basis, Qatar’s investments in US bonds and notes rose 294% compared to $1.23 billion in February 2019, according to official data, while Qatar’s investments in US debt instruments recorded about $5.1 billion in January 2020.

Qatari markets, including the government, have suffered from an accelerated decline in the availability of liquidity recently, especially foreign liquidity. This prompted the Ministry of Finance and the Qatar Central Bank to enter international debt markets to provide liquidity.

While Qatar is pumping money into US bonds, official data released by the Qatar Central Bank in February 2020 showed that the total foreign public debt owed by the government amounted to 196.04 billion riyals ($53.88 billion) until the end of last year.

In early April 2020, Qatar’s Ministry of Finance announced issuing bonds and selling them in international markets with a total value of $10 billion – the second highest number of bonds in its history – amid a sharp decline in its revenues.

During 2018 and 2019, Qatar issued the largest single value of international bonds in its history, with a total value of $12 billion per issue, which was issued by the Ministry of Finance and not registered in the books of the Qatar Central Bank.