MPs have unanimously approved a proposed parliamentary legislation to cap government borrowing at 60 per cent of the gross domestic product (GDP) despite a strong call from the government for a rethink.The proposal by five MPs, led by second deputy speaker Ahmed Qarata, aims to control Bahrain’s borrowing which had reached BD16.7 billion by the end of last year.His Majesty King Hamad had issued a Royal decree in September this year amending the 1977 Development Bonds Law to set the cap at BD16bn.Mr Qarata said the legislation was meant for the future when the government manages to stabilise the economy.

“Borrowing just recently reached 115pc of the GDP before being reduced to 101pc and that’s alarming in both cases,” he said.“The plan should be until 2026 to get public debt dropped by 10pc for each year and then this legislation gets introduced,” he said.“We don’t seek disruption and MPs understand the stabilisation process.”Also commenting, Parliament first deputy speaker Abdulnabi Salman claimed borrowing has reached BD25 billion directly and indirectly.“There are no plans in place to reduce reliance on borrowing and we fear imminent bankruptcy.”Parliament financial and economic affairs committee chairwoman Zainab Abdulamir suggested the solution would be imposing corporate and foreign remittances taxes.Meanwhile, Parliament and Shura Council Affairs Minister Ghanim Al Buainain said huge efforts were under way in the background to reduce the public debt.“The MP is saying it dropped from 115pc to 101pc, so there is huge work, which is not easy and more complex than anyone can imagine,” he said.“We have to always take into account the economy and financial flow, things need to be placed effectively and with study.

”The Finance and National Economy Ministry warned the move would prevent the government from covering existing deficits in the budget.“Borrowing has already exceeded 60pc and making it obligatory by law to respect the cap will just paralyse the government’s treasury,” the ministry said.The Central Bank of Bahrain also said that the proposal would hamper the functioning of the government.“Public debt stands at 101pc of the GDP and just bringing it down to 60pc will put the government in legal and financial trouble with holders of bonds since it would be deemed illegal,” it said.

The same legislation presented by former MPs was shelved by the Shura Council in 2018 following similar warnings that any such cap would be disastrous for the economy. National Audit Office chief and former finance minister Shaikh Ahmed bin Mohammed Al Khalifa had warned MPs in November 2015 that the 60pc cap would result in massive spending cuts that would impact the public.However, the legislators approved it owing to concerns over mounting public debt.Bahrain’s Cabinet had also contested the move in a dossier submitted to the King in February 2016, asserting that it restricted the government’s spending power, prevented completion of planned projects and impacted services such as social welfare programmes.

It was referred back to the National Assembly in June 2018 for review and, the following month, MPs approved government plans to increase the ceiling from BD10bn to BD13bn to fast-track the delayed national budget – far exceeding the proposed cap in the process, following negotiations at the time with Shura Council financial and economic affairs committee.mohammed@gdnmedia.bh

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