Bahrain to remove meat subsidies as cheap oil hits budget

Bahrain will remove government subsidies on meat from September 1, allowing domestic prices to rise, state news agency BNA reported as the government sought to save money as low oil prices pressure its budget.

Like other oil exporting Gulf states Bahrain has for many years subsidised goods and services such as meat, fuel, electricity and water, keeping prices ultra-low in an effort to buy social peace.

Since last year the subsidies have become increasingly difficult for governments to afford as oil prices have plunged, slashing export revenues. Bahrain, with much smaller oil and financial reserves than its Gulf neighbours, has been particularly hard hit.

So Bahrain has been examining possible subsidy cuts and the removal of subsidies from meat could eventually be followed by similar moves on other goods and services.

However, Bahraini citizens will be compensated for the higher meat prices, BNA quoted Industry and Commerce Minister Zayed bin Rashed al-Zayani as saying late on Saturday.

Zayani did not specify how much prices might rise by or give details of the compensation for citizens. Previously officials have said citizens would receive cash payments; foreigners, who comprise about half of Bahrain’s population of roughly 1.3 million, would not be compensated.

BNA quoted Zayani as saying the removal of subsidies would help to stimulate meat imports into Bahrain by encouraging more importers to get involved. He did not elaborate.

Also Zayani did not reveal how much money the government expected to save by removing meat subsidies. A state budget approved last month envisaged a deficit of BD 1.5bn ($3.98bn) in 2015, up from an originally planned deficit of BD 914ms last year.

Passage of the budget was delayed by six months partly because parliament opposed the cabinet’s intention to cut subsidies. In the end the cabinet agreed to work with legislators and the Shura Council, a top advisory body, to overhaul the subsidy system.

Other Gulf states have also begun to reduce subsidies or are considering doing so. In the biggest reform to date, the United Arab Emirates cut subsidies for domestic sales of gasoline this month.