02 July 2015
Bahrain is expected to gradually lift fuel and electricity subsidies starting August as part of plans to rein in spending, a government official said.
The source, who requested not to be identified, told TR Zawya that the Bahraini government also planned to cut spending on public projects by around BHD 244.5 million by the end of 2015. Public spending on projects totaled approximately BHD 1.122 billion (USD 2.97 billion) during 2013 and 2014.
"The lifting of subsidies will affect everyone. However, there will be a mechanism to compensate citizens, although that mechanism is still unclear at this stage," said the official, but declined to elaborate.
Parliamentarian Jamal Bouhassan, chairman of parliament's Foreign Affairs, Defense, and National Security Committee, said the government had not disclosed the structure of the new subsidy scheme, with the exception of subsidies for meat.
"There is an obvious rigidness in amending the amounts proposed to be given to citizens. Until now, we still don't know the details of the compensation system for the rest of the foodstuffs, fuel and electricity," Bouhassan said.
The government wants to reform its finances and free up money to spend on developing the economy, but is facing public resistance on cutting back generous welfare payments. The Gulf Arab state provides significant subsidies to Bahrainis for basic commodities such as flour, red meat, chicken, water, electricity, fuel and gas.
Bahraini national Ahmad Zaman, 27, who works in a private sector company, said there was too much uncertainty now.
"There is a genuine economic crisis. Lifting subsidies on meats, for example, will be catastrophic to the poor as well as to people of medium income like myself," he said.
Mohammad Mansour, a student at the University of Bahrain, agreed.
"We no longer feel the sense of comfort that we used to have," he said. "We trust our government, but we do not know what will happen tomorrow. There is no openness in presenting the issue; the government should explain the new mechanisms of the subsidies' policy to the public in simple terms."
TRANSPARENCY
Parliamentarian Ahmad Qaratah said that while he fully understands the gravity of the Gulf state's fiscal condition and the need for spending cuts, he had grave concerns over the "absence of transparency in the government's handling of the crisis".
Economic analyst Jassem Hussein said that the figures used in the state budget were not clear, especially with regard to project costs. He said the data did not include any reference to the GCC Development Fund, a stimulus program announced in 2011 for Bahrain and Oman, which is expected to deliver USD 10 billion to Bahrain for housing and infrastructure projects over 10 years.
"Five months after the start of the new fiscal year, the budget seems unstable, and this will delay the implementation of projects," he told TR Zawya.
The Bahraini cabinet approved a two-year budget for 2015 and 2016 in May that assumes an oil price of USD60/barrel and projects deficits of BHD 1.47 billion in 2015 and BHD 1.56 billion in 2016.
The budget deficit is expected to swell to over 10% of gross domestic product in 2015, according to an Economist Intelligence Unit (EIU) report issued in May.
It expected real GDP growth to fall below 2% in 2015 as oil production becomes flat and crude prices weaken. Growth is expected to average 3.1% a year going forward, rising to 4% in 2018-2019, as the energy and manufacturing industries expand with new aluminum and refinery capacity coming on stream.
Hussein said parliament has rejected the government's efforts to increase public debt and raise the credit ceiling because of its potentially negative impact on Bahrain's sovereign credit rating.
The government's overall debt burden is increasing as it seeks to finance its deficits and refinance debt by borrowing from both domestic and foreign sources. According to Ministry of Finance data, public debt stood at 42% of GDP at the end of 2014, up from 29% in 2011.
The EIU said it expected Bahrain to continue to turn to the international debt markets to meet budgetary costs, but that it was likely to face rising borrowing costs.
© Zawya 2015
Bahrain is expected to gradually lift fuel and electricity subsidies starting August as part of plans to rein in spending, a government official said.
The source, who requested not to be identified, told TR Zawya that the Bahraini government also planned to cut spending on public projects by around BHD 244.5 million by the end of 2015. Public spending on projects totaled approximately BHD 1.122 billion (USD 2.97 billion) during 2013 and 2014.
"The lifting of subsidies will affect everyone. However, there will be a mechanism to compensate citizens, although that mechanism is still unclear at this stage," said the official, but declined to elaborate.
Parliamentarian Jamal Bouhassan, chairman of parliament's Foreign Affairs, Defense, and National Security Committee, said the government had not disclosed the structure of the new subsidy scheme, with the exception of subsidies for meat.
"There is an obvious rigidness in amending the amounts proposed to be given to citizens. Until now, we still don't know the details of the compensation system for the rest of the foodstuffs, fuel and electricity," Bouhassan said.
The government wants to reform its finances and free up money to spend on developing the economy, but is facing public resistance on cutting back generous welfare payments. The Gulf Arab state provides significant subsidies to Bahrainis for basic commodities such as flour, red meat, chicken, water, electricity, fuel and gas.
Bahraini national Ahmad Zaman, 27, who works in a private sector company, said there was too much uncertainty now.
"There is a genuine economic crisis. Lifting subsidies on meats, for example, will be catastrophic to the poor as well as to people of medium income like myself," he said.
Mohammad Mansour, a student at the University of Bahrain, agreed.
"We no longer feel the sense of comfort that we used to have," he said. "We trust our government, but we do not know what will happen tomorrow. There is no openness in presenting the issue; the government should explain the new mechanisms of the subsidies' policy to the public in simple terms."
TRANSPARENCY
Parliamentarian Ahmad Qaratah said that while he fully understands the gravity of the Gulf state's fiscal condition and the need for spending cuts, he had grave concerns over the "absence of transparency in the government's handling of the crisis".
Economic analyst Jassem Hussein said that the figures used in the state budget were not clear, especially with regard to project costs. He said the data did not include any reference to the GCC Development Fund, a stimulus program announced in 2011 for Bahrain and Oman, which is expected to deliver USD 10 billion to Bahrain for housing and infrastructure projects over 10 years.
"Five months after the start of the new fiscal year, the budget seems unstable, and this will delay the implementation of projects," he told TR Zawya.
The Bahraini cabinet approved a two-year budget for 2015 and 2016 in May that assumes an oil price of USD60/barrel and projects deficits of BHD 1.47 billion in 2015 and BHD 1.56 billion in 2016.
The budget deficit is expected to swell to over 10% of gross domestic product in 2015, according to an Economist Intelligence Unit (EIU) report issued in May.
It expected real GDP growth to fall below 2% in 2015 as oil production becomes flat and crude prices weaken. Growth is expected to average 3.1% a year going forward, rising to 4% in 2018-2019, as the energy and manufacturing industries expand with new aluminum and refinery capacity coming on stream.
Hussein said parliament has rejected the government's efforts to increase public debt and raise the credit ceiling because of its potentially negative impact on Bahrain's sovereign credit rating.
The government's overall debt burden is increasing as it seeks to finance its deficits and refinance debt by borrowing from both domestic and foreign sources. According to Ministry of Finance data, public debt stood at 42% of GDP at the end of 2014, up from 29% in 2011.
The EIU said it expected Bahrain to continue to turn to the international debt markets to meet budgetary costs, but that it was likely to face rising borrowing costs.
© Zawya 2015
