DUBAI: Bahrain’s government plans to cut its budget spending by almost 6 percent in 2013 as it seeks to curb its deficit, a draft budget released by the finance ministry shows.
Budget expenditure in the non-Opec oil producer is expected to total 6.99bn dinars ($18.5bn) over the next two years, state news agency BNA quoted ministry undersecretary Aref Saleh Khamis as saying.
A breakdown provided by BNA shows the ministry pencilled in spending worth 3.45bn dinars for 2013 and 3.54bn dinars for 2014, according to Reuters calculations based on the report. It planned to spend a record 3.65bn this year. Bahrain boosted its original 2012 expenditure plan by nearly 19 percent in September 2011 in order to soothe social tensions, a prospectus for a sovereign bond showed in June. Khamis said the new two-year budget would help meet the basic needs of citizens and raise living standards, while keeping the financial sector stable and improving the investment environment.
Revenue is projected to rise to 2.79bn dinars in both 2013 and 2014 from this year’s plan of 2.52bn, based on an average budgeted oil price of $90 per barrel, compared to $80 in the previous two-year period of 2011-12.
The kingdom expects a budget deficit of 662m dinars or 6.1 percent of gross domestic product in 2013, rising to 753m or 6.6 percent of GDP in 2014, BNA quoted Khamis as saying.
The 2012 deficit is officially projected at 1.1bn dinars in the revised budget, or over 10 percent of 2011 GDP. This year’s actual deficit is likely to be much smaller because of high crude oil prices, which have averaged about $112 this year; analysts polled by Reuters in September predicted a 2012 shortfall of just 1.9 percent of GDP.
Soaring government spending on wages and other social measures has raised pressure on Bahrain’s public finances, which depend on hydrocarbons for about 88 percent of income. Expenditure is set to jump by 41 percent on average in 2012-2014 compared to the level seen over the previous three years.
The oil price that Bahrain will need to balance its budget is estimated at $122 per barrel for 2013 and $126 for 2014, Khamis said, according to BNA. The Reuters poll estimated the Gulf Arab country’s break-even oil price at $113 for 2012.
Reuters
