Qatar has lowest energy subsidies in GCC: IMF

On-budget subsidies in Qatar amounted to 2% of GDP in 2010; implicit energy subsidies are estimated at 3.5%, IMF said.By Santhosh V Perumal/Business ReporterQatar is found to have the least energy subsidies in the Gulf Cooperation Council (GCC) region, according to the International Monetary Fund (IMF).“On-budget subsidies in Qatar amounted to 2% of GDP (gross domestic product) in 2010; implicit energy subsidies are estimated at 3.5%,” IMF said in its Article IV consultation report 2015 on Qatar.Qatar raised the pump prices of gasoline by 25% and of diesel by 30% in January 2011, and diesel prices were again raised in May 2014, by 50%.Bahrain reported the largest energy subsidies of 12.5% of GDP, followed by Saudi Arabia (9.9%), Kuwait (7%), Oman (6.2%) and the UAE (5.7%).“Subsidy reforms so far were mainly raising retail gasoline and diesel prices (in 2011 and 2014), which are still way below international market levels (by about 50% compared to the US prices),” it said about the Gulf region as a whole.Water subsidies may also be sizable, as water consumption rates and technical losses are high in Qatar, as in other GCC countries, IMF said, adding efforts are underway to improve desalination technologies and promote public awareness of sustainable use of energy.Finding that sizeable subsidies finance the inefficient structure that results in high water consumption rates and presents fiscal risks in the long term; the IMF report said Qatar, Saudi Arabia and the UAE consume almost twice as much as the global average for water consumption, while other GCC countries are also above the global average.Rationalising the water usage and reducing waste could reduce consumption substantially (up to 40% in Qatar, for example), it said.On a per capita per annum (pcpa) basis, the GCC countries consume about 65% more water than the world average — 816 cubic metres pcpa against 500 cubic meters pcpa.Renewable resources, notably from rainfall and groundwater are in short supply, and these countries depend on desalinating seawater, which is energy intensive, imposing a cost on the economy and the environment, it said.Finding that to satisfy the growing demand, the GCC has been building and operating costly desalination plants; IMF said desalination provides two-thirds or more of the potable water used in most of the GCC, but it carries enormous economic and environmental costs.Despite a considerable improvement in efficiency in the last decades, the cost to desalinate seawater is still a relatively expensive way of producing potable water, it said.Moreover, seawater desalination is an energy-intensive process, accounting for 10–25% of energy consumption in the GCC on average (about 50% in Qatar), it added.The desalination process has increased the temperature and salinity of the Gulf, with the latter estimated to have risen by around 2% over the last 20 years, with a negative impact on marine life and ecosystems, according to the report.IMF said inefficient agriculture, weak institutional arrangements, and poor management practices present a significant drain on water resources.Demand from the agriculture sector in the GCC constitutes up to 80% of total water demand (the sector enjoys quite a few privileges such as the absence of agricultural water tariffs and various incentive programmes that result in excessive cultivation of water-intensive crops and depletion of groundwater), it said.At the same time, agriculture contributes only a few percentage points of GDP to the GCC’s economies, it said, adding there are also enormous irrigation losses, up to 40%.Some of the GCC countries are now trying to limit water over consumption in agriculture (e.g. by encouraging local farmers to grow crops that need less water and phasing out projects to export wheat), it added.“Weak institutional arrangements and poor management practices are also contributing to wastefulness of water resources. On average, a little over 20% of domestic water is either lost to leakage or is not metered,” it said.