Bahrain Mirror: Economic researcher Sabah Naoush saw that "Bahrain's fiscal policy can't be sound unless reducing deficit leads to reducing the weight of debt in terms of size, service and relationship with economic indicators, and reducing foreign aid." 

In an article published by the Gulf House for Studies and Publishing website on July 17, 023, Naoush spoke about the "fiscal balance program" launched by Bahrain in 2018, noting "the value-added tax interaction, which rose unprecedentedly to 67% in 2023, with an increase in service fees, affects the low-income earners."

He pointed out that the government "has not been able to reduce the recurrent expenditures, which increased from 1965 million dinars in 2022 to 2040 million dinars in 2023." 

He also tackled the issue of government subsidy, considering that "there are political factors that prevent subsidy reductions; thus, this measure will not play a positive role in the fiscal balance."

He warned that "the decline in project expenditures negatively affects economic development," explaining that "rational fiscal policy requires increasing the expenditures of development projects even if they contribute to the deficit and not reducing them even if it leads to balance," noting that "the goal is to achieve an economic balance rather than financial balance."

He highlighted that "the deficit has decreased because fiscal policy assumes higher oil and gas revenues in the current and next years, which is an uncertain assumption, and there are even indications to the contrary."

"The program depends on revenues and not on expenditures, while attention should have been paid to reducing unproductive expenditures, especially the military expenditures," he said.

He pointed out that "the deficit fell in Bahrain while interest rates continued to rise, as well as the total volume of debt, as interest rates increased from 708 million dinars in 2021 to 757 million dinars in 2022 and then to 766 million dinars in 2023.  The volume of debt increased from 18910 million dinars to 19339 million dinars and to 20166 million dinars respectively," as "the increase in the size and interest of debt which coincided with the reduction of the deficit reflects the unsoundness of fiscal policy," according to Naoush. 

He warned that the increase in indebtedness in Bahrain will lead to an increase in public expenditures and an escalation of the fiscal deficit, explaining that "the decline in cash reserves weakens the economic ability of the country, and downgrades the credit rating (from grade A to B) leads to a decline in investments and an escalation in indebtedness."

On the other hand, Naoush stressed that "the resumption of relations between the Gulf countries and Iran and the Qatari-Gulf reconciliation will affect aid from the Gulf countries to Bahrain," quoting what Gulf officials say that "Bahrain does not apply effective measures to achieve financial balance," relying on "official Saudi statements indicating that Riyadh gives aid to countries from the taxes it imposes on citizens. Therefore, aid can no longer be granted on easy terms," considering this "an explicit call for the need that budget relies on self-resources."  "These are not granting, but loans that later turn into debts that have to be repaid," Naoush said.

Meanwhile, he saw that "the development of revenues should not lead to a negative impact on the standard of living of citizens, especially those with low incomes," warning that "pressure on expenditures must address unproductive expenses without the expenses of development projects."

At the end of his article, Naoush called for "reconsidering the fiscal balance program as well as Bahrain's 2030 Vision."

Arabic Version