ABU DHABI: Bahrain is planning more subsidy cuts and intends to impose charges for government services next year in order to boost revenues hit by slumping oil prices, the kingdom’s minister for industry and commerce told Reuters yesterday.
Like other Gulf oil-exporting states, Bahrain has for many years subsidized goods and services such as food, fuel, electricity and water, keeping prices ultra-low in an effort to maintain social peace. But since its oil income began to plunge last year, the government’s budget deficit has widened and the subsidies have become much harder for Bahrain to afford. “We have already started cutting subsidies and we are now looking at others – electricity, fuel, those are next year,” Zayed bin Rashed Al-Zayani said on the sidelines of an investor conference in Abu Dhabi. “It is being studied now,” he said, adding that none of the oil-producing countries was immune to low prices. He did not provide details, saying the government would release them next year. Governments around the Gulf have begun restraining expenditure and studying whether to cut subsidies, but most do not face as much pressure as Bahrain, which lacks the huge financial reserves of its neighbors. Bahrain’s revenues have dropped 60-70 percent because of low oil prices, Zayani said.
Last month, Bahrain more than doubled prices of beef and chicken as it removed meat subsidies; local citizens but not foreigners will receive some compensation in the form of cash handouts. In April, the government raised the price of natural gas sold to industry.
The kingdom is also looking at boosting revenues by imposing charges on government services that are currently free or carry minimal fees, Zayani said, adding that each ministry would do this independently. As part of efforts to diversify its economy beyond oil, Bahrain will in the first quarter of 2016 unveil a new short-and medium-term industrial strategy, now in the final stages of planning. “We are looking at more export-based industries to create employment and that can be accommodated with our current resources,” Zayani said.
Also, the Kingdom of Bahrain has begun marketing a dual-tranche US dollar-denominated benchmark-sized bond, according to a source. The issuer is seeking to sell a January 2021 bond at a yield in the high 5% region, and a January 2026 bond at 7% area. Bank ABC, BNP Paribas, Citigroup, HSBC and JP Morgan are running the 144A/Reg S transaction, which is expected to be as early as yesterday’s business. Bahrain is rated BBB- by Standard & Poor’s and Fitch. —Agencies