Reuters/Dubai
Bahrain will begin cutting subsidies for goods and services to reduce state spending on its foreign population as low oil prices pressure its budget, a top official said.
Bahraini citizens will receive cash payments from the state to offset price rises when subsidies are removed, said Minister of State for Information Affairs Isa bin Abdulrahman al-Hammadi. Foreign citizens would not receive such payments.
“The majority of beneficiaries from subsidy of consumer goods and services are foreign nationals resident in the kingdom and companies but not individual Bahraini citizens,” the official Bahrain News Agency quoted him as saying late on Monday.
The government will therefore redirect subsidy policies to benefit local citizens only, Hammadi said.
About half of Bahrain’s population of roughly 1.3mn is estimated to be expatriate. They benefit from state subsidies which keep down prices of fuel, meat, electricity, water and other items.
Paying for the subsidies has become increasingly difficult for Bahrain as oil prices have plunged since last year.
Earlier this month the cabinet approved a draft budget which envisaged the budget deficit climbing to 1.47bn dinars ($3.90bn) this year and 1.56bn dinars next year, from an originally planned 914mn dinars last year.
The government will have to borrow to bridge its budget gap, so “now the government borrows to support citizens only”, Hammadi was quoted as saying.
He did not give a specific timetable for subsidy cuts or say how big they might be. The subsidy for meat, which costs 47mn dinars, may be the first to be removed, but it is small compared to electricity and water subsidies, he said.
The budget draft sees spending on non-oil subsidies rising to 754mn dinars in 2015 from an originally planned 661mn dinars in 2014, and then falling back to 653mn dinars in 2016. Oil subsidies would total 103mn dinars this year and 105mn dinars next year.
Subsidy cuts could push up consumer prices in Bahrain and put upward pressure on foreign workers’ wages, potentially hurting companies’ competitiveness. Hammadi said the new policy would take into account the issue of competitiveness.
