Bahrain’s top government advisory body has passed a state budget for 2015 and 2016 after a six-month delay during which parliament forced changes to the plan, underlining the heavy financial pressure that Bahrain faces amid low oil prices.
The budget was approved by the Shura Council late on Sunday, local media reported. Parliament had opposed the cabinet’s intention to cut subsidies to save money, and there were disagreements over how state funds would be distributed.
“It is the most difficult budget that we had to deal with in the past 12 years,” the Gulf Daily News quoted Minister of Finance Sheikh Ahmed bin Mohammed al-Khalifa as saying during the debate last week.
“We have to realise the more we borrow, the more our currency gets devalued, so we have to be content with what we have and spend according to capabilities.”
While most of the Gulf’s oil exporting economies have coped with the plunge in energy prices since last year, Bahrain does not have their huge financial reserves, so it has less room to maneouvre.
The Gulf Daily News quoted Sheikh Ahmed as saying that to cover its budget deficits, Bahrain planned to borrow money domestically and abroad. “We need to borrow 50 per cent from here and 50 per cent from abroad.”
A budget plan proposed by the cabinet in May envisaged spending of KD 3.571bn ($9.47bn) in 2015, down from an originally planned KD 3.708bn in 2014. Spending was projected at KD 3.721bn in 2016.
Under this draft, the deficit was forecast to climb to KD 1.47bn this year and KD 1.563bn next year, from an originally planned KD 914m last year.
The Gulf Daily News reported that after the revisions secured by parliament, the deficit would rise to KD 1.504bn in 2015 and total KD 1.505bn in 2016.
Under the original budget plan, Bahrain was to begin cutting some of the lavish subsidies it provides for goods and services such as meat and electricity. Bahraini citizens, but not the many foreign workers in the country, were to receive cash payments from the state to offset price rises they would face.
Parliament demanded control over changes to the subsidies, and the Gulf Daily News quoted Sheikh Ahmed as saying the government would now work with legislators and the Shura Council on an overhaul of the subsidy system that was acceptable to all.
“We have to control the huge spending that far exceeds our budget and allow our economy to grow at the same time,” he was quoted as saying.