A wave of strict measures to further reduce government spending will be introduced in the coming weeks, it was revealed.
Government ministries and bodies will bear the brunt of the new rules, said Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa yesterday. He told Shura Council members during their weekly session that plans adopted by the Cabinet last week, as part of Bahrain’s economic and fiscal reform programme, to reduce government expenditures by 30 per cent were just the beginning.
He spoke as the Shura Council approved a Royal decree issued in October by His Majesty King Hamad that retrospectively raised Bahrain’s debt ceiling to BD10 billion. Low oil prices have resulted in significantly reduced revenues, prompting the government to target additional borrowing as a means to raise money. In addition to raising the debt ceiling from BD7bn, the decree also grants the government executive powers to generate income through issuing bonds.
“We can’t say that we, in the government, are perfect and we are working with legislators to reach something that would enable this country to survive the current global oil crisis that is affecting Bahrain,” said Shaikh Ahmed. “We knew the slump in oil prices was coming, it was clear years ago.
We had plans for something but we always put it on hold despite knowing at the time that whatever we were doing was drainage. “Further drops are expected and now more than ever people’s welfare comes first and our direction is in this regard. “There are new waves of reductions within the government and we have several plans that we are going to implement in the next phase.”
Shaikh Ahmed said he wanted to change people’s negative perception on borrowing, adding that it reflected a healthy developing economy. “Personally I don’t want to see deficits but borrowing has come because our economy has developed – we have low unemployment and a booming financial growth despite the shake-ups and the unrest in 2011,” he explained.
“But, again revenues have to reflect real progress and borrowing comes to match needs and not as a budget projection. “We have to revise the budget and make changes and with it we have to open new doors for revenues rather than dependence on oil.”
However, he declined to comment on the new measures when approached by the GDN but said the Cabinet would make an announcement in the coming days. Shaikh Ahmed added Bahrain’s GDP is expected to grow more than three per cent. He also called on Shura members to draw up laws that strengthen investments.
Meanwhile, Shura’s financial and economic affairs committee chairman Khalid Al Maskati said he supported raising the debt ceiling to 10bn. “At the moment they need to go up to BD10bn, they already have a balance of BD500 million from the previous ceiling of BD7bn and need BD10bn to be in balance by the end of next year,” he said.
“With the current crisis they could need to go beyond BD10bn, but again the international economic trend changes and hopefully borrowing is not needed. “The new cap that obliges the government not to exceed 60pc of GDP will restrict them, but it could be looked into when the government wants to borrow more to match programmes and projects directed to the public.”
By Mohammed Al A'Ali
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