Bahrain plans 6pc spending cut in 2013
, November 7, 2012
Bahrain's government plans to cut its budget spending by almost 6 per cent in 2013 as it seeks to curb its deficit, a draft budget released by the finance ministry shows.
Budget expenditure in the non-Opec oil producer is expected to total BD6.99 billion ($18.5 billion) over the next two years, state news agency BNA quoted ministry undersecretary Aref Saleh Khamis as saying late on Tuesday.
A breakdown provided by BNA shows the ministry pencilled in spending worth BD3.45 billion for 2013 and BD3.54 billion for 2014, according to Reuters calculations based on the report. It planned to spend a record BD3.65 billion this year.
Bahrain boosted its original 2012 expenditure plan by nearly 19 per cent in September 2011 in order to soothe social tensions, a prospectus for a sovereign bond showed in June.
Khamis said the new two-year budget would help meet the basic needs of citizens and raise living standards, while keeping the financial sector stable and improving the investment environment.
The revenue is projected to rise to BD2.79 billion in both 2013 and 2014 from this year's plan of BD2.52 billion, based on an average budgeted oil price of $90 per barrel, compared to $80 in the previous two-year period of 2011-12.
The kingdom expects a budget deficit of BD662 million or 6.1 per cent of gross domestic product in 2013, rising to BD753 million or 6.6 per cent of GDP in 2014, BNA quoted Khamis as saying.
The 2012 deficit is officially projected at BD1.1 billion in the revised budget, or over 10 per cent of 2011 GDP. This year's actual deficit is likely to be much smaller because of high crude oil prices, which have averaged about $112 this year; analysts polled by Reuters in September predicted a 2012 shortfall of just 1.9 per cent of GDP.
Soaring government spending on wages and other social measures has raised pressure on Bahrain's public finances, which depend on hydrocarbons for about 88 per cent of income. Expenditure is set to jump by 41 per cent on average in 2012-2014 compared to the level seen over the previous three years.
The oil price that Bahrain will need to balance its budget is estimated at $122 per barrel for 2013 and $126 for 2014, Khamis said, according to BNA. The Reuters poll estimated the Gulf country's break-even oil price at $113 for 2012.
Bahrain relies on output from Saudi's Abu Safa oil field for some 70 per cent of its budget revenue. The field's current production level is just below 300,000 barrels per day, of which Bahrain currently receives 50 per cent.
Its 2013-2014 budget counts on its output from that field staying at 150,000 bpd in both years, while output from its own wells would reach 47,500 bpd in 2013 and 51,000 bpd in 2014.
Analysts have said Saudi Arabia, which supports Bahrain's Sunni rulers politically, could give the small state more oil from the Abu Safa field if Manama's budget runs into trouble.
In the June bond prospectus, however, Bahrain said no assurance could be given that the current level of output that it receives from Abu Safa would be maintained.
Last year Bahrain received an aid pledge of $10 billion spread over 10 years from its wealthier Gulf neighbours, but in June this year it said it had not received any of that money so far, and it is unclear when the funds will start to flow.
The government's direct and indirect subsidies are projected at BD1.5 billion in 2013 and BD1.6 billion in 2014, out of which BD878 million and BD961 million respectively would represent indirect support for domestic sales of oil and gas.
Project spending is seen at BD555 million in 2013 and BD530 million in the following year, BNA said, down from BD977 million planned for 2012.-Reuters