A recent trend of fiscal reform throughout the Gulf Cooperation Council (GCC) region has had implications for the infrastructure sector – and in some fields more than others.
S&P Global Ratings’ Karim Nassif explains to Infrastructure Intelligence that low oil prices are encouraging governments to implement higher taxes and lower subsidies for the oil and gas, telecommunications and utilities sectors to relieve financial burdens from the state.
These sectors are experiencing economic headwinds, and some types of companies are faring better than others. Large government related entities (GREs) that receive special mandates are expected to perform best throughout government fiscal reform and the region’s weakened economic status. However, smaller private players that are not leaders in their respective fields, have not adopted conservative funding strategies and are dependent on government subsidies are expected to remain highly exposed.
On a more positive note, alternative financing methods are expected to develop as government revenue and cheap bank funding continue to dry out. S&P expects this to take the form of deepened capital markets, sukuk (Islamic bonds) and the increased utilisation of public-private partnerships.
The full article can be read here.