Bahrain Mirror (Exclusive): A source close to the government said that "the budget of the ministries in Bahrain is in a very precarious situation, as there are no financial allocations to implement the projects approved in the financial budgets."

As part of the Government's attempts to obtain Gulf financial support, the Crown Prince and First Deputy Prime minister, Salman bin Hamad Al khalifa, received at the Riffa Palace, on Wednesday (October 3, 2018), Kuwait's Finance Minister Nayef Al-Hajraf, who conveyed an oral message from the Emir of Kuwait.

Bahrain's King Hamad bin Isa Al Khalifa hinted on Wednesday (October 3, 2018) that his country would remain dependent on the support of Gulf states until the oil discovery's feasibility is proved, a discovery that was announced by Bahrain earlier this year.

Despite this harsh economic situation, Manama continues to increase security and military spending, and spends more on public relations campaigns, to sway official international and parliamentary positions in its favor, especially from the US and Europe, as well as buy off loyalties inside the country. Also, the head of Civil Service Bureau Al-Zayed has disclosed in an interview with Al-ayyam newspaper that more than 4,000 volunteers were employed in jobs replacing thousands of Shiite employees who were dismissed in 2011.

"These volunteers are not as Al-Zayed described them in his press statements. In fact, they reflect masked unemployment and wastage of expenses. But this is politics," the source says.

The Bahraini government is relying on the arrival of Gulf support before next November; however, the source notes that the Gulf States said that Bahrain is required in return to take several harsh measures, including imposing the value added tax (VAT). Saudi Arabia is studying increasing Bahrain's share from the Abu Sa'afa oilfield to 75% instead of 50%. If this step is taken, Bahrain will receive additional revenues of at least $1.5 billion annually, which will (theoretically) help it improve the cash reserve and pay off public debts.

According to the source, the granting states should take time into consideration. As in November 2018, Bahrain will have to pay its $750 million debts, thus it has to receive the support before this date.

It further highlights that the "analysis of some economists says that even if Bahrain failed to implement the required reforms, it will receive Gulf aid because not receiving support means the collapse of its financial situation and the consequent failure to peg the dinar to the US dollar. The Gulf States see that failure to maintain the dinar exchange rate against the dollar as a threat to the GCC states financial policies that for their part peg their currencies to the US dollar."

In the framework of the measures taken by the government to avoid the financial crisis, the source noted that Bahrain sought the help of Lazard financial advisory and asset management firm to improve the financial situation in the gulf kingdom. It also saw that this move "came after the public financial situation in Bahrain was harmed by the oil price drop and foreigners refrained from purchasing government bonds."

While Bahrain maintained the expenses of ruling family members and senior officials, the government reduced the employee-related expenses. Promotions were reduced to the lowest level and annual increments were set at 10%, the percentage it was before the financial crisis. Overtime pay was also reduced, as staff members who work overtime are given additional hours off and holidays rather than money.

The source indicated that there is a plan to privatize many sectors, especially the simple jobs which low income citizens resort to, like farming, guarding and others.

Bahrain suffers from a severe financial crisis due to the political crisis that has plagued the country for long years as well as the decline in oil prices that has begun to improve. Nonetheless, this won't help that much in facing the crisis surrounding the debt that has reached 11.5 billion BD.

1 Dollar= 0.377 BD

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