VZCZCXRO1362
RR RUEHDE RUEHDIR
DE RUEHDO #0375/01 1330610
ZNR UUUUU ZZH
R 120610Z MAY 08
FM AMEMBASSY DOHA
TO RUEHC/SECSTATE WASHDC 7914
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 DOHA 000375 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EPET PGOV ECON QA
SUBJECT: QATAR ANNOUNCES RECORD BUDGET OF USD 28 BILLION 
FOR 2008-09 
 
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SUMMARY 
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¶1. The government of Qatar approved last month the largest 
budget in the country's history.  Government officials touted 
the 2008-09 budget as proof that the country remains 
committed to its sustainable development plans.  Private 
sector leaders believe the 2008-09 budget creates more 
favorable conditions for private sector expansion and will 
help Qatar manager its economic development growth.  END 
SUMMARY. 
 
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Qatar Announces 2008-09 Budget 
------------------------------ 
 
¶2. The Government of Qatar announced April 1 the country's 
2008-09 fiscal year budget.  Estimated revenues for the 
2008-09 budget are expected to total USD 28.3 billion 
(assuming that oil is priced at USD 55 per barrel),compared 
to USD 19.9 in the previous fiscal year (estimated oil priced 
of USD 40 per barrel), a 42.2 percent increase.  About 70 
percent of government revenues, roughly 85 percent of export 
earnings, come from oil and gas.  Estimated public 
expenditures are expected to surge by 46 percent to USD 26.3 
billion for 2008-09, up from USD 18 billion in 2007-08. 
Based on estimated government revenues and expenditures, the 
surplus for fiscal year 2008-09 will be USD 2 billion, up 
from a surplus of USD 1.85 billion last year. 
 
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Infrastructure Projects 
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¶3. The GOQ plans to invest significant sums on infrastructure 
development again this year.  Qatar's 2008-09 budget 
allocates USD 8.4 billion for infrastructure development, 
representing 29 per cent of total public expenditures, up 
from the USD 2.75 billion allocated last year.  Ongoing and 
new infrastructure projects include a new airport and seaport 
as well as upgrades to roads, sewers, water and electricity 
delivery systems, and oil and gas-related projects. 
 
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Health and Social Services 
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¶4. The GOQ will also continue to spend substantial sums on 
health and social services.  The 2008-09 budget allocates USD 
2.52 billion for health and social services, corresponding to 
9.6 percent of the entire budget.  These funds will be used 
to construct new health centers and continue the development 
of existing hospitals. 
 
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Education 
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¶5. Huge sums will also be spent on education.  The 2008-09 
budget allocates USD 5.4 billion for this purpose, 
representing 12.24 percent of the overall budget.  A 
significant part of this sum will go toward the construction 
of new independent (i.e. charter) schools.  (Note:  Qatar has 
embarked on an education system reform program under which 
the GOQ provides buildings for self-managing institutions 
with international curriculum standards.) Large amounts will 
also go toward the Sidra Medical Center, a major hospital 
project.  When completed, Sidra will serve as the primary 
teaching hospital for Weill-Cornell Medical College's Doha 
campus.  The project is scheduled for completion in 2010 at a 
cost of USD 2.19 billion. 
 
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Statements by GOQ Officials 
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¶6. Qatar Finance Minister Yousef Hussain Kamal wrote in his 
annual budget statement that this year's budget reflects the 
government's intent to continue comprehensive and sustained 
development, while at the same time curbing the rate of 
inflation without reducing the level of public spending on 
major economic and social projects.  Undersecretary of 
Finance Khalaf Al Mannai expected budget surpluses to 
continue over the coming several years, as Qatar continues to 
increase its oil production (with a goal of eventually 
reaching one million barrels a day) and press ahead with 
natural gas development projects, which could double Qatar's 
liquefied natural gas exports over the next three years.  Al 
 
DOHA 00000375  002 OF 002 
 
 
Mannai said Qatar's revenues would continue to increase given 
high global energy prices.  This is the eighth year in a row 
that Qatar has projected budgetary surpluses.  Al-Mannai said 
inflation - which reached 13.7 percent in the fourth quarter 
of 2007 - is the "natural result" of a large numbers of 
development projects that require large amounts of liquidity 
over a relatively short period.  However, he said, combating 
inflation requires coordinated fiscal, monetary and related 
economic policies, noting that Qatar had taken steps to 
increase supplies of building materials, a shortage of which 
has been the main driver of inflation. 
 
¶7. The GOQ has also taken measures, according to Al-Mannai, 
to cap rent increases, increase the supply of goods and 
services in other sectors, and boost subsidies for basic 
foodstuffs and raw materials.  These policies are being 
implemented based one guidance from the Finance Ministry and 
the Central Bank of Qatar (CBQ).  Despite its substantial 
energy income, Qatar still finds it necessary to borrow 
abroad to help fund its infrastructure projects.  Mannai 
observed that, given the massive investment requirements over 
the next decade, Qatar has no alternative but to tap foreign 
sources of funds.  He stressed, however, that the level of 
public debt is at a safe level.  Qatar's debts are estimated 
at USD 33.1 billion (end 2007) and USD 39.5 billion (end 
2008) according to a report published last March by SABB 
(formerly known as the Saudi British Bank). 
 
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Comments by Private Sector 
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¶8. Consensus among businessmen is that the 2008-09 budget 
creates very favorable conditions for continued private 
sector growth at a rapid pace.  Businessman and president of 
the Qatar Businessmen Association Sheikh Faisal Al Thani 
predicted that the private sector would cope with the 
country's economic realities and witness further expansion 
and prosperity.  Sheikh Khalifa Al Thani, Chairman of the 
Qatar Chamber of Commerce and Industry, said the 2008-09 
budget focused on the "human component" of the economy and 
aimed to achieve a better standard of living for the nation, 
reflecting a major transformation in the country's economic 
progress. 
 
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Strong Economic Performance 
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¶9. Despite inflationary pressures, the outlook for the Qatari 
economy remains positive, with projected 15.5 percent growth 
in GDP to about USD 73.7 billion in 2008.  The economy will 
remain strong based on projected oil and natural gas sector 
revenues.  An ongoing increase in domestic demand, mainly a 
result of the construction and financial services industries, 
will further bolster economic growth.  According to a 
statement recently released by the Qatar General Secretariat 
of Development and Planning (GSDP), the growth rate outside 
the hydrocarbon sector in 2007 was nearly double that of the 
energy sector.  Nominal GDP in 2008 will rise to USD 74.1 
billion, with per capita GDP at USD 78,157, according to 
SABB. 
 
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Comment 
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¶10. Although growth in public spending over the past few 
years due to sharp growth rates in hydrocarbon incomes has 
been one of the main factors behind escalating inflation, the 
GOQ has obviously opted not to restrict expenditures to 
tackle inflation.  Tempted by high oil prices and steadily 
increasing natural gas revenues, Qatar is unlikely to curb 
investment spending anytime soon.  Inflation will remain high 
and continue to be the largest economic challenge facing the 
government in the months ahead. 
RATNEY