Gulf governments will be forced to rely on debt markets as their fiscal deficits rise to over $250 billion amid an extended period of low oil prices over the next two years, Moody’s Investors Service said.
Moody’s said that Kuwait, Qatar, and the United Arab Emirates (UAE) are expected to post government deficits of single percentage points, while deficits in Bahrain, Oman, and Saudi Arabia will reach around 14 percent to 17 percent of GDP. “Lower oil prices will also affect GCC public finances, eroding their fiscal reserve buffers and increasing debt levels. We also increasingly view the GCC as a two-tier region,” Dubai-based Senior Sovereign Analyst Mathias Angonin said. “Our assumption is that a growing share of the deficits will be financed by debt, [and] a lower share by reserves going forward,” he added. Angonin said proposed subsidy reforms, capital expenditure cuts, and the introduction of a sales tax starting in 2018 will not be enough to balance GCC budget deficits. He warned that fiscal adjustments “could create social discontent,” emphasizing that “a careful balance needs to be struck.” Moody’s downgraded Bahrain and Oman and will decide at the end of May whether to adjust down Saudi, UAE, Qatari, and Kuwaiti ratings. [FT, Zawya, Gulf News, 3/21/2016]
Qatar has invited all members of the Organization of the Petroleum Exporting Countries (OPEC) and other major producers to attend talks next month on a deal to freeze output at January levels to support the global oil market. “The need has become an urgent matter to bring back balance to the market and recovery to the global economy,” Qatar’s Energy Ministry said in its invitation letter to the April 17 meeting. Saudi Arabia said it is prepared to join the oil output freeze even if Iran does not take part, raising the prospects for a deal among major producers. “There is agreement from many countries to go along with a freeze—why make it contingent on Iran,” a Saudi OPEC delegate said. Meanwhile, a Libyan OPEC delegate said that Libya will not attend the meeting because it wants to be able increase output when the situation allows. [Reuters, 3/22/2016]
Iraq will not resume pumping crude through a Kurdish pipeline to Turkey unless it reaches a financial agreement with the Kurdish Regional Government (KRG), the Iraqi Oil Minister Adel Abdul Mahdi said. He said the Iraqi government had decided to stop pumping crude, previously 150,000 barrels per day, from fields under the management of its state-run North Oil Company through the pipeline. Abdul Mahdi demanded that Iraq either return to a previous agreement between Baghdad and the KRG or a new agreement be inked. Meanwhile, Iraqi Shia cleric Moqtada al-Sadr urged followers demonstrating in Baghdad for a new government to also demand that politicians give all Iraqis a direct share of the nation’s oil revenues. [Reuters, 3/22/2016]
The Central Bank of Egypt (CBE) kept the pound stable at 8.78 per dollar at its regular foreign currency auction on Tuesday, its first since cutting the number of auctions to once a week from three. The CBE said it sold $104.5 million at the auction after offering $120 million earlier on Tuesday. However, the pound weakened on the black market as demand exceeded supply. Black market sources said they would sell dollars at a range between 9.68-9.70 pounds on Tuesday, without specifying volumes of trade. [Reuters, 3/22/2016]
Also of interest
Saudi policy body approves economic reforms | Reuters
Qatargas eyes expanded LNG supply deals with UK, Dutch terminals | Reuters
Oman’s Bank Muscat in talks to raise loan worth up to $300 million | Reuters
Egypt’s Suez Canal revenue drops to EGP 3.1 billion in February | Reuters
BG Egypt suspends some development wells after price disagreement | Reuters
Egypt draft budget for FY2016/2017 sees deficit 9.9 percent of GDP | DNE
Food prices lift Morocco inflation to 0.9 percent year-on-year in February | Reuters
Moody’s warns Gulf states will be forced to tap debt markets
Gulf governments will be forced to rely on debt markets as their fiscal deficits rise to over $250 billion amid an extended period of low oil prices over the next two years, Moody’s Investors Service said. Moody’s said that Kuwait, Qatar, and the United Arab Emirates (UAE) are expected to post government deficits of single percentage points, while deficits in Bahrain, Oman, and Saudi Arabia will reach around 14 percent to 17 percent of GDP. “Lower oil prices will also affect GCC public finances, eroding their fiscal reserve buffers and increasing debt levels. We also increasingly view the GCC as a two-tier region,” Dubai-based Senior Sovereign Analyst Mathias Angonin said. “Our assumption is that a growing share of the deficits will be financed by debt, [and] a lower share by reserves going forward,” he added. Angonin said proposed subsidy reforms, capital expenditure cuts, and the introduction of a sales tax starting in 2018 will not be enough to balance GCC budget deficits. He warned that fiscal adjustments “could create social discontent,” emphasizing that “a careful balance needs to be struck.” Moody’s downgraded Bahrain and Oman and will decide at the end of May whether to adjust down Saudi, UAE, Qatari, and Kuwaiti ratings. [FT, Zawya, Gulf News, 3/21/2016]
Qatar invites OPEC members and other producers to April oil meeting
Qatar has invited all members of the Organization of the Petroleum Exporting Countries (OPEC) and other major producers to attend talks next month on a deal to freeze output at January levels to support the global oil market. “The need has become an urgent matter to bring back balance to the market and recovery to the global economy,” Qatar’s Energy Ministry said in its invitation letter to the April 17 meeting. Saudi Arabia said it is prepared to join the oil output freeze even if Iran does not take part, raising the prospects for a deal among major producers. “There is agreement from many countries to go along with a freeze—why make it contingent on Iran,” a Saudi OPEC delegate said. Meanwhile, a Libyan OPEC delegate said that Libya will not attend the meeting because it wants to be able increase output when the situation allows. [Reuters, 3/22/2016]
Iraq seeks financial agreement with Kurds before pumping crude to Turkey
Iraq will not resume pumping crude through a Kurdish pipeline to Turkey unless it reaches a financial agreement with the Kurdish Regional Government (KRG), the Iraqi Oil Minister Adel Abdul Mahdi said. He said the Iraqi government had decided to stop pumping crude, previously 150,000 barrels per day, from fields under the management of its state-run North Oil Company through the pipeline. Abdul Mahdi demanded that Iraq either return to a previous agreement between Baghdad and the KRG or a new agreement be inked. Meanwhile, Iraqi Shia cleric Moqtada al-Sadr urged followers demonstrating in Baghdad for a new government to also demand that politicians give all Iraqis a direct share of the nation’s oil revenues. [Reuters, 3/22/2016]
Egypt central bank sells $104.5 million at regular FX auction
The Central Bank of Egypt (CBE) kept the pound stable at 8.78 per dollar at its regular foreign currency auction on Tuesday, its first since cutting the number of auctions to once a week from three. The CBE said it sold $104.5 million at the auction after offering $120 million earlier on Tuesday. However, the pound weakened on the black market as demand exceeded supply. Black market sources said they would sell dollars at a range between 9.68-9.70 pounds on Tuesday, without specifying volumes of trade. [Reuters, 3/22/2016]
Also of interest
Saudi policy body approves economic reforms | Reuters
Qatargas eyes expanded LNG supply deals with UK, Dutch terminals | Reuters
Oman’s Bank Muscat in talks to raise loan worth up to $300 million | Reuters
Egypt’s Suez Canal revenue drops to EGP 3.1 billion in February | Reuters
BG Egypt suspends some development wells after price disagreement | Reuters
Egypt draft budget for FY2016/2017 sees deficit 9.9 percent of GDP | DNE
Food prices lift Morocco inflation to 0.9 percent year-on-year in February | Reuters