Public Debt Crosses Borrowing Ceiling: Who's Responsible for this Financial Waste?
2022-12-22 - 11:03 am
Bahrain Mirror (exclusive): The state's consolidated final account for the outgoing year 2021 revealed that the public debt (sum total of internal and external loans) exceeded 16.863 billion Bahraini dinars. What does this news mean?
First and foremost, it means that the government has surpassed the official borrowing ceiling that it has set under the provisions of Decree Law No. 27 of 2020, which states that the public debt ceiling should be at no more than 15 billion dinars
This clearly indicates that the government has failed to manage the public debt and has also failed in managing the spending rationalization and austerity plan that it set. When you exceed the borrowing ceiling, you have failed in managing the country's finances despite the steps you announced.
This is not the first time that the government has surpassed the public debt. In fact, the truth that it did not announce is that the public debt ceiling had been crossed for a long while, but through a devious plan.
This elusive plan allowed major state companies to engage in direct borrowing and issue sukuk, as Bapco company did, and as the Oil and Gas Holding Company that was run by Nasser bin Hamad, the prime minister's brother, did later on. The company borrowed at least $600 million, as did other government enterprises, while these borrowings were not added to the public debt.
However, what are the reasons for this serious financial deterioration in Bahrain, despite the significant rise in oil prices?
The reason is financial waste, one of the major forms of which is corruption and theft. There are sums that are being borrowed that no one knows what they are put into or where they go. An economic source says that corruption in the country has reached an extent where direct transfers of money are being made to private funds that ultimately belong to the elite in the ruling family.
The big question remains in the minds of citizens: Why does the government of Bahrain continue to issue sukuk and borrow despite the high oil prices and the large amount of liquidity generated from the oil trade?
Under the income section, the final account for the year 2021 recorded an increase of 26% compared to the year 2020, as the revenues achieved in 2021 amounted to 2615 million dinars, while the revenues of 2020 reached about 2082 million dinars. The difference demonstrates the size of the increase derived from oil on the one hand, and from the imposition of the value-added tax in addition to imposing fees on many services, on the other hand, especially the steady rise in electricity prices.
However, what's the most significant and dangerous in this regard is the news that passed by quietly on the 19th of December amidst the people's preoccupation with the bustle of the World Cup. It's the arrival of a government memorandum to the House of Representatives, in which the government said that it is currently conducting a comprehensive and extensive study on government support policies including all its aspects, and that the study includes unifying subsidies provided to citizens.
The language of the memorandum unequivocally reveals the government's lack of direction towards removing taxes, reducing fees, or taking measures that improve the livelihoods of citizens, following in the footsteps of their Gulf neighbors. There are even concerns that the government will target the aid programs that less fortunate families receive.
The memorandum apparently aims at opening this discussion and reconsidering the aid and subsidies due to the poor and citizens with limited income. Does this mean that the government has decided to remedy its failure in managing the country's finances by resorting to its citizens' pockets?