Bahrain urged to curb public debt
Manama, November 28, 2013
Bahrain must drastically curb and reduce public debt - or face a potential crisis. This warning has come in the audit report, which fears an international ratings downgrade if swift action is not taken.
The National Audit Office Report showed the overall public debt stood at BD3.8 billion ($10.02 billion) last year, compared with BD3.1 billion in 2011, said a report in the Gulf Daily News (GDN), our ssiter publication.
The loan ceiling rose by 42 per cent last year to reach BD5 billion, up from BD3.5 billion in 2011.
The report urged the Finance Ministry to rethink its borrowing policies to avert facing insolvency and stressed the need to find other funding alternatives for Bahrain to be able to continue repaying its loans and avert further interests on debt.
According to updated figures released in the report, increased annual loan ceiling caused public debt inflation to rise by 187 per cent last year, compared with the 2009 benchmarks.
The report warned that international financial agencies could downgrade Bahrain's rating, which would mean higher interest rates on development loans granted to Bahrain. It warned that Bahrain could find it difficult to honour its future obligations and sustain further accumulated interests on the loans in case it fails to contain public debt and tame debt inflation.
According to the report, the loan interest soared to BD150 million last year - including BD92 million as external interest, while interests on local loans topped BD58 million.
The Finance Ministry said it tried hard to keep the ratio of public debt compared with Gross Domestic Product (GDP) below international and GCC levels. It stressed the importance of economic stability and sustainable financial policies - being the cornerstone to successfully manage public debt and keep them under control.
Meanwhile, the National Audit Office Report said Gulf Air's unpaid fuel debts to Bapco soared to $316 million as of November. The now-liquidated Bahrain Air has yet to pay fuel debts worth $29 million.
The report urged the Finance Ministry to co-ordinate with Bapco and take legal measures to ensure the debts are paid.
The ministry records show that Bapco had urged the liquidator of Bahrain Air to ensure the payment of overall debts of $30.5 million.
However, the ministry's reply did not refer to Gulf Air's accumulated debts to Bapco. - TradeArabia News Service