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Bahraini MPs may block budget over subsidy cuts plan

MANAMA, May 27, 2015

Bahraini MPs are threatening to block the national budget for this year and next if the government insists on its plans to reduce subsidies.

The warning was issued yesterday (May 26) in a parliament statement that was unanimously approved by MPs, some of whom have threatened to resign if subsidies are revoked, said a report in the Gulf Daily News (GDN), our sister publication.

In the statement, released by parliament chairman Ahmed Al Mulla, MPs threatened repercussions if the government followed through on proposals to axe meat subsidies from August 1 and compensate eligible Bahrainis with payments into their bank accounts.

The statement also criticised the government plan for being vague, since it is not clear who will qualify for the food allowance once meat subsidies are scrapped.

Bahrain’s Cabinet has also announced that fees for government services that are currently subsidised will increase from August 1, when they will be provided at cost price.

Meanwhile, Information Affairs Minister and official government spokesman Isa Al Hammadi revealed on Monday that the second phase of cuts would see power and water subsidies, which are expected to cost the government BD325.5 million ($857.5 million) this year and BD315.7 million next year, scrapped.

Oil and gas subsidies are likely to be scrapped in the third phase of the subsidy reductions, but the minister did not say when phase two and three would be implemented.

“We reject the government’s unilateral decision to axe meat subsidies last week and other cuts that will follow, as announced by the Cabinet on Monday, which contradicts the agreement that nothing will be enforced without MPs’ and Shura Council members’ consent,” said the parliament statement yesterday.

“Parliament has repeatedly asked the government not to affect people’s livelihood and to keep subsidies as they are in the new budget for this year and next.

“We want a comprehensive and precise study that addresses the negatives and positives from all aspects and angles, whether living standards or the financial impact – which the Cabinet has never presented to us.

“The new budget will not be passed unless what was agreed with MPs in the four-year government (financial) plan (submitted to parliament in February) is respected.

“People’s welfare is a red line that can’t be crossed.”

Target

The statement questioned why meat subsidy was being targeted, describing it as a minor outlay when compared with other government spending plans.

“The money the government is planning to save from meat subsidies is nothing. It is estimated at around BD28 million,” it said.

“There are other unnecessary costs that surpass it and could be scrapped.

“We want a clear policy on subsidies that is really effective and not rushed.

“With regard to companies that are under the Bahrain Mumtalakat Holding Company (Bahrain’s sovereign wealth fund), their contributions (to national revenues) are still zero in the budget despite them getting government support and their assets are worth $10 billion.”

Some MPs had intended to stage a walkout in parliament yesterday, but were foiled by Mr Al Mulla who officially ended the weekly session before they could leave.

However, parliament did agree to postpone a vote on whether subsidies should be scrapped until next Tuesday’s session, when Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa is expected to attend.

Revenues

The government wants to cut back spending on subsidies due to lower revenues, which are expected to reach a total of BD4.255 billion in 2015 and 2016, compared with anticipated expenditure of BD7.292 billion 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 and last November raised its debt ceiling from BD5 billion to BD7 billion to meet the shortfall.

Shaikh Ahmed previously told MPs that Bahrain spent BD935 million on subsidies alone last year. - TradeArabia News Service




Tags: Bahrain | Budget | Subsidies | reduce |

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