Bahrain's budget deficit scuppers public sector pay rise plan

Published January 20th, 2016 - 05:14 GMT

Plans for a 15 per cent pay rise for government staff have been put on hold for 12 months due to the current economic climate. The Shura Council yesterday voted to shelve the public sector salary hike, earlier proposed by MPs, with an agreement to review it next year.

It took the decision after financial and economic affairs committee chairman Khalid Al Maskati warned that Bahrain’s combined budget deficit for 2015 and 2016 could reach BD5 billion – BD2bn last year and BD3bn this year – due to the global slump in oil prices.

The total deficit for both years was originally forecast at around BD3bn, based on a projected oil price of $60 per barrel. However, with Brent crude now valued at around $29 per barrel – having dropped below $30 per barrel for the first time in 12 years – Mr Al Maskati said the deficit could widen by as much as 66 per cent.

Quoting figures obtained from the government, he explained the country was simply unable to afford pay rises for civil servants.  “The government is facing huge challenges and has to reduce unnecessary spending,” said Mr Al Maskati. “We are currently in a dark tunnel and instead of helping search for light, increasing wages would mean we remain in the dark for a long time. “We need more time to study the long and short term future and there has to be a comparison between income and costs. 

“The picture bigger requires us to look into the welfare of all people – not just those working for the government, but also those in the private sector through fair packages. “The fact is that people’s financial ability is below what it should be.

“Living standards are way below other GCC countries, but the country has to take tough decisions which are out of its hands or else it will fall – it will fall flat.”

Mr Al Maskati added that despite a Royal Decree raising the debt ceiling to BD10bn, the government expected to take loans of no more than BD8bn by December due to recent cost-cutting measures – such as raising the price of fuel, axing meat subsidies and lifting electricity and water rates, among other things.

Eighteen of 35 Shura Council members present yesterday voted in favour of postponing government pay rises, despite accepting the concept in principle. Twelve opposed the delay, while five abstained. Information, Parliament and Shura Council Affairs Minister Isa Al Hammadi had unsuccessfully urged the Shura Council to reject the pay rises altogether, arguing that the government would need time to recover once the current oil price crisis ends.

“We can’t fund the move,” he said. The pay rise proposal had been with the Shura Council since 2008 and members opted not to discuss it in 2011 after the government increased wages by 36pc, based on recommendations of the National Dialogue. “The budget is 90pc based on oil revenues,” said Mr Al Maskati.

“From the beginning, depending on one source of income meant it was shaky. “Basing calculations on a projected oil price of $60 per barrel made it more challenging, given the slump since October. “There has to be corrective measures, both political and economic.

“The government can’t go on putting pressure on the people, but everyone has to bear the patriotic responsibility of being patient. “There is a 33pc drop in annual government revenue and people should be aware that living normally is impossible, but everything is possible when things improve in future.”

He later quoted a popular Arabic proverb, which goes: “Stretch your legs to the size of your blanket.” Shura Council first vice-chairman Jamal Fakhro advocated throwing out the proposal, saying government wages had already risen to BD1.5bn from just BD600m in 2008.

The chamber also rejected parliamentary proposals determining a new government pay scale, as well as support funds for private and public sector workers. 

By Mohammed Al A'Ali

 


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