Bahrain plans to borrow more than BD9 billion ($23.7 billion) over the next six years.

This was revealed yesterday (May 13) by Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa, who described the projection as ‘tentative’ following the first round of negotiations on the new national budget between Shura Council and MPs, said a report in the Gulf Daily News (GDN), our sister publication.

He also confirmed that subsidies would be removed from companies, industries and expatriates but said a timescale for this move had yet to be determined.

"We will continue borrowing more than BD9 billion over a period of six years until we reach an equilibrium as we work on necessary procedures to increase revenues and reduce costs," said Shaikh Ahmed.

"Legislators need to accept and acknowledge the challenge we face - especially with the BD7 billion cap put on us, which we have to remove or else borrow faster than planned.

Essential

"Negotiations are essential and companies, industries and expatriates will have to pay the actual costs of services if we are to reduce the burden on the economy.

"This needs to be in a time frame that we agree upon with MPs.

"Our main target is to provide subsidies and aid to medium-income Bahrainis - and, of course, those with less."

What constitutes a ‘medium-income Bahraini’ needs to be determined by MPs, said Shaikh Ahmed - adding that it was unfair for those not in need to be receiving financial support.

"There are priorities we have to address and if we manage to tackle them sooner rather than later, then we will be in a very strong position," he said.

"We will work towards this gradually, as we did when increasing gas prices - everyone was aware of the future rates and we are looking for a similar approach, but the public's consent is necessary.

"There are alternate avenues that we could explore and public feedback is vital because our coffers can't bear the huge burden anymore, for the sake of the future and citizens' interests."

The minister stressed that the oil price slump was to blame for the apparent reduction in spending.

"Spending has not gone down it is the same, we just projected it based on $100 per barrel of oil two years ago and this time it is $60 with slight reductions in spending next year being necessary as we don't know what prices may be," he said.

Parliament financial and economic affairs committee chairman Isa Al Kooheji emphasised the need for a phased approach to subsidy cuts.

"An approach similar to the Traffic Law that was slowly introduced is needed as the public becomes aware of reasons behind the new solutions," he said.

Implementation

"We can't just remove subsidies from companies and industries because they have contracts and this will change a lot of their costs - it needs gradual implementation."

Meanwhile, acting Shura Council financial and economic affairs committee chairman Dr Abulaziz Abul warned of a downgrade if international credit rating agencies were not satisfied by the current discussions on the budget.

"We must take an optimistic approach and be transparent and clear on policies and spending," he said.

"There is nothing to hide, because it will harm us rather than benefit us, what with the international classification authorities here in Bahrain."

Parliament and the Shura Council are set to meet individually every Monday, while holding negotiations with the government every Wednesday and having separate meetings of both chambers' financial and economic affairs committees daily on the new two-year national budget.

The GDN reported on Tuesday that Bahrain's government plans to spend BD1.4 billion on subsidies this year and next.

It is forecast that oil will account for BD3.45 billion in revenue over the same period. - TradeArabia News Service