Qatar faces big task in raising billions to pay for World Cup
The year 2022 may seem long way off, but Qatar will soon have to start thinking of how it will pay for the billions of dollars worth of infrastructure and other upgrades it will need if it is to host the FIFA World Cup successfully.
With the government planning to build nine stadiums and renovate three others, as well as invest more than 100 billion Qatari rials (Dh100.8bn) in infrastructure projects, analysts are concerned about the debt burden being carried by the tiny country, which has a population of about 1.4 million.
"Whether they will increase the level of debt or not is an important question," said Brahim Razgallah, the chief economist for the MENA region at JP Morgan. Governments have historically underestimated the cost of hosting large sporting events such as the football World Cup and the Olympic Games, he said.
"They'll finance some of this spending through debt markets. It'll increase the burden, but it's not like the energy sector: a lot of these projects will take a long time to bear some of the benefits and bring profits to the country," Mr Razgallah said.
The capital-intensive energy sector accounts for about one third of the debt held by Qatar.
Before the announcement by FIFA, banks were sounding alarms on the level of the country's debt.
External debt was expected to peak at US$90bn (Dh330.57bn), about 73 per cent of GDP this year, according to a study from the Saudi bank Samba, which also said the debt level was "manageable".
Analysts at the credit ratings agency Standard & Poor's (S&P) said, however, the gas-rich country would have ample resources to fund projects related to the World Cup without tapping debt markets.
Luc Marchand, an associate director at S&P, said Qatar's natural resources and sovereign wealth assets meant it had "a lot of margin for manoeuvre".
"Not much more sovereign debt is expected. As in the past, most of the infrastructure will be financed via the budget revenues, directly coming from the oil and gas sectors," he said.
"Private sector financing is generally asked to play a bigger role, notably in the hotel industry and real estate."
S&P rates Qatar's sovereign debt at "AA", the highest in the region alongside Abu Dhabi's, but the 2022 World Cup is outside of the agency's five-year forecasting period.
Updated: December 5, 2010 04:00 AM