Bahrain’s national accounts hang in the balance after parliament yesterday (March 24) voted overwhelmingly to veto a decision to raise the country's debt ceiling - four months after it was taken.

Thirty MPs, including parliament chairman Ahmed Al Mulla, voted against a Royal Decree issued last November by His Majesty King Hamad - which raised the amount of money the country could borrow from BD5 billion ($13.1 billion) to BD7 billion, said a report in the Gulf Daily News (GDN), our sister publication.

Six of the 36 MPs present during yesterday's session abstained, meaning not a single MP voted in favour of the decree, which was issued shortly before parliament's new term commenced.

MPs clapped, whistled and shouted Mr Al Mulla's name when he voted against the decree, which will now be reviewed by the Shura Council.

If the National Assembly's upper chamber also votes against the decision to raise the debt ceiling, it will be retrospectively vetoed and considered void.

This could have huge repercussions for the government, which would effectively have to pay back anything it has already borrowed above BD5bn and is already trying to balance the books in the face of lower revenues stemming from reduced oil prices.

It would also raise serious questions about the two-year national budget for 2015 and 2016, which has still not been presented to parliament by the Cabinet, since it would dramatically reduce the amount of cash available for spending.

Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa met MPs on Sunday in an attempt to persuade them to support an increase in the debt ceiling, despite the Central Bank of Bahrain (CBB) warning on Thursday that it could affect the country's credit rating.

Parliament's financial and economic affairs committee chairman Isa Al Kooheji, who earlier told the GDN that Bahrain's borrowing had already reached BD5.6bn, sought a postponement of the vote yesterday '“ despite his committee recommending that the debt ceiling increase should be vetoed.

He argued a one-month postponement would give the government time to present its draft budget, which would help MPs decide whether the increase in borrowing was required, but he was voted down by 25 MPs.

Al Kooheji warned that vetoing additional borrowing of BD2 billion could directly affect the public, since it was needed to fund social welfare schemes.

“Our earlier recommendation to reject the decree was made because we didn't have a clear vision on the government's borrowing direction, but after holding two meetings - the latest on Sunday - for three hours each we believe that postponement would allow us a chance to further understand,” said Al Kooheji.

“If we use the government's calculations based on a possible $60 per oil barrel, then the government's revenue is BD1.9 billion - and spending on projects is three times that amount, without allowances that MPs want to be taken into account.”

Meanwhile, Shaikh Ahmed warned that any decision to veto the increase in borrowing would affect vital projects.

“We just need a vote to postpone discussions until we present the budget,” Shaikh Ahmed told MPs yesterday, before parliament went ahead with the vote regardless.

He also alluded to a six-year plan that the government had come up with to balance the books.

“We will then (when the budget is presented) tell you about our six-year plan that will bring us level before we start addressing or tackling borrowing, which as everyone realises means three budget terms,” said Shaikh Ahmed.

The minister also reiterated plans to increase charges for companies that currently benefit from cheap services - such as petrol, electricity and water '“ due to government subsidies.

“It is those not in need, like companies, who have to pay at least cost price for services provided by the government,” said Shaikh Ahmed.

However, MP Dr Shaikh Abdulmajeed Al Asfoor said financial experts from the private sector should be consulted - especially in light of the CBB's warning.

Accusation

“We don't know what plans the ministry has to resolve the deficit, despite the CBB saying our financial grading and status could be degraded,” said Dr Al Asfoor.

Meanwhile, MP Abdulrahman Buali accused the government of failing to provide 'strong reasons' for increasing the debt ceiling.

“We needed strong reasons behind the government's option to borrow, rather than change its spending policies, but we were presented with none,” he said. - TradeArabia News Service