S&P: GCC government debt to surge by record-high $100 billion this year

Kuwait is planning to raise up to $16 billion by the end of its current fiscal year, ending in March 2021. (AFP file photo)
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Updated 20 July 2020

S&P: GCC government debt to surge by record-high $100 billion this year

  • S&P estimates GCC central government deficits to reach about $490 billion cumulatively between 2020 and 2023
  • Since the oil price crash in 2014-2015, Gulf states have relied heavily on debt financing

DUBAI: S&P Global Ratings said on Monday it expected Gulf countries’ government debt to increase by a record high of about $100 billion this year, as funding needs spike due to the coronavirus crisis and low oil prices.
The ratings agency estimates Gulf Cooperation Council (GCC) countries will register an aggregate central government deficit of about $180 billion, to be financed with $100 billion of debt and an $80 billion draw-down in government assets.
“Based on our macroeconomic assumptions, we expect to see GCC government balance sheets continue to deteriorate up until 2023,” it said in a statement.
It based its forecasts on an average Brent oil price of $30 per barrel for the rest of 2020, $50 in 2021 and $55 from 2022.
Gulf countries have been hit hard by the pandemic and lower oil prices have exacerbated that, with most countries expected to post double-digit fiscal deficits this year.
Saudi Arabia, Qatar, Bahrain and the emirates of Abu Dhabi and Sharjah have already borrowed tens of billions of dollars this year to bolster state coffers.
S&P estimates GCC central government deficits to reach about $490 billion cumulatively between 2020 and 2023.
Since the oil price crash in 2014-2015, Gulf states have relied heavily on debt financing, raising over $90 billion in local and international debt in 2016 and 2017.
After a new record high of about $100 billion this year, S&P expects total debt issuance to decline to around $70 billion by 2023.
Oman, one of the financially weakest countries in the Gulf, has not raised international debt yet this year but S&P expects it to do so in the coming months.
Kuwait is planning to raise up to $16 billion by the end of its current fiscal year, ending in March 2021, but its ability to borrow depends on parliament approving a long-debated new debt law.


Emirates stops flights to three major Australian cities

Updated 16 January 2021

Emirates stops flights to three major Australian cities

  • Flights to/from Sydney, Brisbane and Melbourne will be suspended until further notice: Emirates
  • The airline will still run two flights a week to Perth

DUBAI: Emirates has suspended flights to Australia's three largest cities as the country further restricts international arrivals over fears of new virus strains.
The Dubai-based carrier was one of the last to maintain routes into and out of the country's east coast throughout most of the pandemic but on Friday evening told travellers a handful of planned flights next week would be the last.
"Due to operational reasons, Emirates flights to/from Sydney, Brisbane and Melbourne will be suspended until further notice," Emirates said on its website.
The airline will still run two flights a week to Perth, but the cuts are another barrier for tens of thousands of stranded Australians still attempting to return home.
The Australian government responded by announcing more repatriation flights and said other carriers still flying services to the cities could fill the gap.
"The capacity that Emirates was able to use within the cap will be allocated to other airlines, ensuring that there are still as many tickets, as many seats available into Australia," Finance Minister Simon Birmingham said.
A small number of airlines - including Qatar Airways and Singapore Airlines - are still running services to Australia but local media were already reporting delays and cancellations among returning travellers.
Australia's borders have effectively been closed since March to curb the spread of the virus, with the government even limiting the number of citizens allowed to return.
Last week travel restrictions were further tightened, with arrival numbers slashed and all travellers into the country requiring a negative Covid-19 test before flying.
In making the changes, Prime Minister Scott Morrison cited a growing number of people in quarantine testing positive for new strains of Covid-19.
Fears that a variant of the virus from Britain, believed to be more contagious, had leaked into Brisbane from hotel quarantine triggered a snap lockdown in the city last week.
"There are many unknowns and uncertainties in relation to the new strain, and so that's why this precautionary approach, we believe, is very sensible," Morrison said.
Australia continues to deal relatively well with the virus, having recorded about 28,600 cases and 909 deaths linked to Covid-19 in a population of 25 million.