Moody's Investors Service has raised Qatar's foreign currency country ceilings for bonds and deposits to A3 from Baa2. Also upgraded to A3 are the ratings of the State of Qatar's outstanding foreign-currency denominated bonds and its issuer rating for local currency obligations. The outlooks are stable for all ratings.
The upgrades are supported by a strategy of economic development based on diversification away from oil and on investment in gas-related projects, says Moody's. Qatar possesses the world's third-largest gas reserve after Russia and Iran. Careful planning has led to an effective use of large-scale borrowing, and this policy is now starting to pay significant dividends, gradually leading to the creation of new wealth accompanied by diminishing debt ratios.
Moody's notes that the contribution of liquefied natural gas (LNG) to the Qatari gross domestic product (GDP) is expected to rise steadily and will catch up with crude oil revenues in a few years time. The government has signed several long-term supply agreements including the Dolphin project, which will provide for the supply of gas to the United Arab Emirates (UAE) and Oman by way of pipelines.
Qatar is also playing a leading role in developing the evolving gas-to-liquid (GTL) technology. The aim is to develop the first commercial world-scale GTL production plant to produce ultra-clean middle-distillate products such as diesel and naphtha, products for which global market demand is growing at a rapid pace.
Concerning economic reform, the government of Qatar has already implemented a relatively ambitious privatization program which should further boost the policy of economic diversification, Moody's adds. A new law is also allowing 100 percent ownership in some sectors.
Qatar's total direct government debt at the end of the fiscal year 2001 stood at nine billion dollars or 56 percent of GDP and the country's total external debt was estimated at $12.3 billion. Moody's notes, however, that the government and government agencies hold significant cash deposits in local banks. Debt service obligations are well within the economy's capacity at about 14 percent of exports, says Moody's.
More importantly, according to the rating agency, the borrowings are directly linked, in most cases, to the projected export earnings of the borrowing entities. Recourse to the international capital market will continue as long as economically profitable projects are proposed and market conditions make this option viable.
Moody's believes that Qatar may therefore continue to hold a rolling debt in the foreseeable future, its easy market access reflecting confidence in the country's economic management, its good track record and perceived development potential. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
