Finance Ministry Announces Inaccurate Numbers Again, Deficit Larger in Reality

2020-02-19 - 7:59 am

Bahrain Mirror (Exclusive): Doubts have been raised about the data that the Finance Ministry released regarding the past year and claiming that financial balance has been reached. Did the Ministry present inaccurate information on the deficit after the announced false data on the public debt?

The Finance Ministry published preliminary data on the past year on December 31, 2019 and said that the budget deficit shrank to 4.7% of the GDP in 2019 compared to 6.3% in the year prior to that.

According to the data, the deficit was calculated before adding the interests of the public debt, which reached 640 million dinar, i.e. third of the deficit of the last budget.

Preliminary data released by the Ministry was not accurate, as the deficit is expected to reach 8% after including the public debt interests, the same rate predicted by the IMF.

The Middle East Business Intelligence website published an editorial in which it confirmed that Bahrain's fiscal deficit was reduced to 8% in 2019, from 11.9% in 2018.

These figures don't conform to those announced by the Finance Ministry on February 10, 2020.

When Bahrain was handed a lifeline by its Gulf neighbours in October 2018, it committed to a consultation with the Arab Monetary Fund on a fiscal balance program aimed at eliminating the country's fiscal deficit by 2022.

The IMF no longer expects the deficit to fall further by 2021, which makes the prospect of fiscal balance being achieved in 2022 unlikely.

Though oil GDP growth has returned to positive figures in 2019, this is not expected to hold in 2020 as market interpretations of supply and demand-side risks continue to weigh on global oil prices, according to the website.

It is true that the government succeeded in reducing total public expenditures by about 128 million dinars, but failed to diversify sources of income.

The 63% increase in non-oil revenues does not indicate the success of its plans in this area, as this was largely achieved by the introduction of the value added tax (VAT) and increased fees on government services such as electricity and labor charges.

Such actions have backfired on the business sector, as 2019 witnessed an economic stagnation and the closure of dozens of shops.

Citizens fear that the government would impose more austerity measures in order to reach its fiscal targets. MP Ahmed Salloum revealed the government is seeking to restructure the cash support citizens receive.

Cash payments include the high cost of living allowance, allowance to improve the standard of living for retirees, housing allowance, disability allowance and meat subsidy.

It is true that the GDP growth dropped to 2.1 in 2019 and the fall in oil prices threatens the fiscal balance program scheduled for next year, but continued pressure on citizens financially could fuel political turmoil in the country, which has not seen stability for nine years. 

Arabic Version