Legislators have asked Bahrain's government to redraw its budget for this year and the next in an attempt to reduce the deficit.

They asked the Cabinet, represented by the Finance Ministry, to come up with alternative plans and redistribute spending during a joint meeting of the financial and economic affairs committees of parliament and Shura Council yesterday (May 31), said a report in the Gulf Daily News (GDN), our sister publication.

However, members of both chambers said they would reject any proposed spending cuts to health, housing and education projects.

They have also asked the government to include subsidies in the national budget, and to present plans for subsidy cuts to the National Assembly as a separate document for study.

The closed-door meeting was held following the Cabinet's announcement last month that meat subsidies would be scrapped from August 1, when fees for unspecified government services currently subsidised would also increase.

Information Affairs Minister and official government spokesman Isa Al Hammadi also revealed last week that the second phase of cuts would see the scrapping of power and water subsidies, which are expected to cost the government BD325.5 million ($862.9 million) this year and BD315.7 million next year.

"The outline of the budget does not prioritise spending despite challenges with slumping oil prices and the budget deficit with borrowing reaching BD7 billion by the end of next year," said joint committees' chairman Khalid Al Maskati.

"The government will have to present a whole new outline and reintroduce from scratch budgets for projects and expenditure.

"In all cases subsidies and financial support given to Bahrainis cannot be touched unless sanctioned by parliament or the Shura Council."

The committees have given the government until Thursday to present its new plans.

"We are not telling the government to cancel planned projects or stop work on existing ones, we only want to postpone those that are not necessary until things improve financially," explained Al Maskati.

Blueprint

"Housing, education and health spending will not be touched and could be increased depending on the reshuffled financing that will be presented in the new blueprint on Thursday.

"Subsidies can only be directed through just systems to Bahrainis and through clear criteria that we approve and any future plans by the government has to be approved by us and not just them."

Oil and gas subsidies are likely to be scrapped in the third phase of subsidy reductions, but no time frame has been given for phase two or three of the planned subsidy overhaul.

Both parliament and the Shura Council have objected to the government's plans to save money by axing subsidies, with MPs last week threatening to veto the stalled budget for 2015 and 2016 altogether - and even resign - if subsidies are reduced.

The government needs to make savings due to lower revenues, which are expected to reach a total of BD4.255 billion in 2015 and 2016, compared with anticipated expenditure of BD7.292bn over the same period.

A dramatic drop in the oil price, which accounts for more than 80 per cent of government revenues, has contributed significantly to a reduction in national income.

As a result, Bahrain is facing a fiscal deficit of BD1.47 billion this year and BD1.563 billion next year. - TradeArabia News Service