What Deficit is the Finance Minister Talking about while Oil Prices are at $116?
2022-06-08 - 3:00 p
Bahrain Mirror: Why is it that the Bahraini Finance Minister is talking about the state budget deficit while oil prices increased more than double the price set by the government?
Why is the Central Bank of Bahrain still issuing government bonds in light of Bahrain's doubling of oil revenues recorded by Bahrain as a result of the record hike in crude prices?
Official statements and procedures regarding the country's financial situation are not transparent; while the IMF talks about oil countries, including Bahrain, achieving fiscal surpluses, government stances oppose these statements.
Minister of Finance and National Economy Salman bin Khalifa Al Khalifa surprised everyone with his statements at the Davos Economic Forum about his expectations of a deficit reduction in the first half of the year.
The minister said his country expects a significant reduction in the budget deficit for the first half of this year, due to high oil prices.
If the minister is talking about half-term financial calculations, since the beginning of the year, oil prices have exceeded the price of a barrel of oil in the budget bill. The price of oil was around $70 per barrel, while the price was set at only $55.
As Russia announced a limited military operation in Ukraine in February, oil prices increased dramatically to $116 per barrel.
According to financial statements, Bahrain needs a price equivalent to only $106 to achieve a zero budget deficit. This means that in the first half Bahrain will achieve fiscal surpluses, not a reduction in the deficit as the minister says.
The IMF has predicted that Bahrain's oil revenues would rise by 39% as oil prices increase. Under these figures, the government will achieve surpluses of at least BD 3 billion by the end of the year.
The figures provided by the Minister of Finance do not reflect the real state of the country's finances and clearly indicate a prior government desire to manipulate fiscal surpluses, spend them in secret or transfer them to the accounts of senior ruling family members.
Contrary to this data, the Central Bank of Bahrain (May 16, 2022) issued government bonds worth BD 150 million, which are 5-year debts at an interest rate of 5.5% annually.
Why is the Government re-borrowing even with additional financial revenues? Where will this money go?
While the Gulf oil countries talk transparently about fiscal surpluses, Oman (among the lowest oil producers in the Gulf) has declared a fiscal surplus since last year.
It is strange that the king finally told traders during an official meeting that the country had recovered economically. What kind of recovery would it be if the finance minister was only talking about the deficit at a time of an oil price boom.