2019 Roundup: Public Debt Hits Highest Level in Bahrain’s History

2019-12-31 - 9:04 p

Bahrain Mirror (2019 Roundup): Bahrain's public debt has set a new record surpassing the 13 billion dinar ceiling, despite a Gulf-backed structural plan which aims at achieving a balance between revenues and expenses.

At the onset of 2019, Bahrain introduced the Financial Balance Program, an agreement under which Bahrain undertakes structural reforms in exchange for $10 billion support from three Gulf States: Saudi Arabia, Kuwait and the United Arab Emirates.

One of the agreement terms was that Bahrain opens the door for voluntary retirement of thousands of its employees. According to official figures, 8,025 voluntarily retired, 45% of whom retired from the Ministry of Education, which caused a major disruption in the education system.

Bahrain resorted to funding retiree stipends from the Unemployment Fund. After lengthy discussions, the Shura Council and the House of Representatives approved a law on March 24, 2019, allowing the government to withdraw 230 million dinars from the fund established to support the unemployed.

Under the Financial Balance Program, which is monitored by the Abu Dhabi-based Arab Monetary Fund, the government has raised electricity tariffs of foreigners and commercial and industrial sectors in order to reach a balance in the electricity and water authority's expenses.

The new tariff, along with factors including increasing annual fees on business activities and opening the door for foreigners to obtain business records, has led to the closure of dozens of shops in a new sign of the financial crisis.

It is true that these steps have succeeded in reducing government expenditures, but have not succeeded in halting the steady increase in public debt. Figures from the National Audit Office (NAO) showed that government debt hit a new record.

NAO report said that the public debt exceeded 13.983 million dinars, accounting for nearly 106% of Gross Domestic Product (GDP). The report indicated that government companies had borrowed funds from external funds but had not been included in the public balance by the Ministry of Finance.

The Ministry of Finance said that not including the corporates debts in the public balance was due to the fact that they enjoyed financial independence.

According to these figures, the government exceeded the public debt ceiling set under a law issued in 2017 by 13 billion dinars, amid lack of financial surveillance from the legislative authority.

The IMF had expected public debt to rise to 114% of GDP in the medium term, higher compared to the 93% at the end of 2018.

Although it received $4.6 million (1.7 billion dinars) from the Gulf support funds, the Bahraini government borrowed on September 25, 2019 BD 765 million.

The interests of the public debt in the 2019 budget amounted to about 640 million dinars, the largest number in the state budget. 

Arabic Version