Results Completely Contrary to Finance Minister Statements... Public Debt Exceeds BD12 Billion for the first time
2019-10-22 - 4:08 am
Bahrain Mirror (Exclusive): Has Bahrain lost control of its public debt? The sharp rise in government debt can't be attributed only to the fall in oil prices, but also to several other factors, most notably the political turmoil and failure of the government's economic policies.
Nevertheless, the government has tried to create an atmosphere of optimism by rebalancing the country's finance and halting the record rise of public debt after receiving a new bailout package from neighboring countries nearly a year ago as part of a fiscal balance program by 2023.
As part of this campaign, the government published updates indicating that public debt fell to 11.293 million dinars last August, compared to the total public debt which reached 11 billion and 551 million dinars in August last year.
However, new data has shown that the public debt rose to a new record. Reuters revealed that Bahrain has issued $2 billion (BD 765 million) in bonds, surpassing public debt by 12 billion dinars for the first time.
According to new figures, public debt is currently about 96% of GDP, and that percentage is expected to rise by the end of this year due to government failure in reducing spending.
The Minister of Finance and National Economy Salman bin Khalifa Al Khalifa announced that the Gulf-backed financial balance program will have an annual impact of BD 800 million, but the results appear to be contradict this statement as Bahrain borrows an amount close to the expected impact.
Government policies have so far failed to control spending despite the International Monetary Fund recommendations, for instance, the government continued to double security spending.
Contrary to the stated trends, Bahrain signed a major arms deal with the United States last month. Crown Prince Salman bin Hamad Al Khalifa signed an agreement in Washington to buy the Patriot Air Defense missile system for 2.47 billion dollars (BD 933 million).
In addition, the government has failed to diversify sources of income and has continued to rely on oil as a major resource. Instead of diversifying the economy, the Government introduced VAT and increased fees on government services.
In the absence of a national council that can hold the Government accountable, the latter has not yet revealed any transparent data or concrete results to control the public debt.
The IMF expects the public debt to increase to 114% of GDP in the medium term, up from 93% at the end of 2018.
With low oil prices, failed spending control policies, and diversification of income sources, IMF expectations seem more accurate than trying what is known now as the Bahrain team creating an atmosphere of optimism for establishing financial balance.