Bahrain Mirror: The Al-Wefaq National Islamic Society issued a statement on the general budget for the fiscal years 2019-2020, which was submitted to the House of Representatives and the Shura Council and passed in one session.

Al-Wefaq noticed in its statement that the deficit is likely to increase and that the public debt will increase, according to the International Monetary Fund, to reach 114%.  The report said that Bahrain's dependence on subsidies and aid mainly reflects a terrible failure, the inability of the authorities to govern the state and face risks, and leaving the financial reality to rely on aid.

It stated that the budget of recurrent military and security expenditures accounts for 35%, and the education, health, housing and community services sectors are allocated only 25% of the state budget.

Al-Wefaq saw that Bahrain needs to begin transferring part of the military and security budgets to education, health and social assistance sectors.

The talk about making the citizen a priority is not realistic, and nothing indicates that. On the contrary, the citizen has become a priority to pay the government only, in the new budget.

The statement included three parts:

First: The general policy of the state in preparing and passing the budget

Second: Selected notes on the numbers and details of the budget

Third: Demands to reform the process of preparing and passing the general budget of the state

First: The general policy of the state in preparing and passing the budget

With regard to the general policy of the State in preparing and passing the budget, the following can be observed:

1 - The lack of sufficient transparency in the draft budget submitted by the authorities, which makes the figures, both at the level of income and expenditure, foggy and cannot be relied upon accurately.

2 - The constant, unnatural and huge increase of the population, especially without increasing the resources or developing the infrastructure, due to the upsurge in the number of foreigners or the large unconsidered naturalization.

 3 - The authorities' continued rely on oil funds by more than 80% of the budget resources, without a clear plan for varying the sources of income, which puts Bahrain in danger in case oil prices decreased or any developments affected the oil market. Bahrain has relied on oil and gas revenues by a very large percentage, which exceeded 82% during the past eight years.

4 - The financial balance program depends on imposing taxes on citizens without the existence of other clear plans except relying on citizens and allowing to increase taxes at any moment, which has serious repercussions on the living and social situation.

Initiatives to reorient government support are related to targeting citizens, such as taxes and services provided to citizens, like electricity subsidies, which decreased from BD 350 million to BD 141 million annually.

5. Public debt is still close to 100% of the income and can be increased according to the International Monetary Fund (IMF), which said in a report on May 10 that public debt will reach 114%, a sign of deterioration of the state's financial situation, an increase of burdens and absence of a national wealth management plan.

Public debt has risen from 13% to 87% in 10 years, while initiatives to reduce the deficit have not yet been tested.

6 - Absence of a clear plan for the social security rate within disordered financial conditions, which indicates the continuation and increase of taxation with the absence of insurance, which is the shortest way to social instability.

7 - The reflection of the political crisis on the financial situation of the state. The authorities allocate budgets for undeclared security and military expenditures, which cost billions of dinars without the slightest need for it.

8 - Investors with capitals and major projects fear and avoid working in Bahrain for various financial, economic and political reasons.

9. Bahrain's net foreign assets have fallen to an extent that threatened the value of the local currency, which is unprecedented. This threat has not yet been addressed sufficiently.

10 - Lack of trust in the Bahraini economy by observing the credit rating of the Kingdom of Bahrain in the capital market and seeing accurately how economic entities classify Bahrain in terms of income, expenses, general reserves and cash available in the treasury of the State, as the classification continues to be negative.  Clearly, if the credit rating institutions believe that the credit situation of the Bahraini government will continue to weaken significantly in the coming years, it will result in reducing the credit rating. According to Moody's, there is no clear and comprehensive support and integration strategy for Bahrain

Second: Selected notes on the numbers and details of the budget

11 - The total budget deficit is approximately 1.3 billion dinars (3.45 billion dollars). It amounted to 700 million dinars in the fiscal year 2019 and 600 billion dinars in the fiscal year 2020, which is a negative indicator, and no promises to reduce public debt have aroused.

12. The recurrent expenditures of the State in the budget of fiscal years 2019-2020 were estimated at 6.659 billion dinars, which is greater than the recurrent expenditures of fiscal years 2017-2018 - which amounted to 4.278 billion dinars - by 2.38 billion dinars. This means that we are going downhill in the management of resources and different expenditures.

 13. Bahrain's dependence on subsidies and aid mainly, and its inability to meet the needs of the country and its people, which reflects a terrible failure, the inability of the authorities to govern the state and face risks, and leaving the financial reality to rely on aid.

14 - The absence of a number of income sections related to housing projects. The payments of citizens to the Ministry are absent from the budget. It was noticeable in the final account of 2017 that the revenues of the ministry were only BD 10,000, and according to Table (2), the income of the Ministry of Housing is only 35,000 in 2019.

15 - Increasing the military and security budgets in Bahrain to the maximum at the expense of development, salaries, education, health and services.

Recurrent military and security expenditures alone account for 35% of the state budget, without adding the budget of security projects, arms deals and others, which means that military and security expenditures take over the state budget.

16. It is noticeable that the tax system lacks alternatives for needy families. We have not noticed any financial allocations for these matters, which is a source of worry and concern.

The tax system in a country with limited expenditure on projects may be reflected on the citizen's pocket with regard to building goods, for example, and some other commodities such as food and transportation.

Talking about expanding the tax system in 2020 to include additional commodities and imposing taxes on medium and small companies will reflect negatively on raising the living standards of citizens - and this is seen in the increase of tax income by 50 million dinars in 2020.

17. The significant decline in project budgets, which may make it difficult for the economy to achieve remarkable progress with the limited size of projects in the country, noting that most projects depend on Gulf aid and subsidies.

18 - Linking the economy to public and private sectors does not assure the investor, while alternatives to finance the private sector are absent, and this is a prominent feature in the state budget.

These commitments are a reflection of the overall orientation of the authorities and of the continued reliance on the primary source of income, oil.

19. The Government's plan to reduce the level of fiscal deficit is linked to the steps it has taken, such as reducing expenditures, identifying employment opportunities for citizens and the new pension system, but this is not a realistic solution. There is an urgent need to expand the financial resources and find precise alternatives.

20. The attached figure of the International Monetary Fund (IMF) shows the price of a barrel of oil needed to balance the budgets of Gulf oil exporting countries. For example, Bahrain needed the price of Brent to be $95 a barrel for its budget to be balanced. If the price was above $95.2, the budget will have surplus and if below, there will be a deficit, and so on for other countries. In the current and next year's budgets, $94 and $89 respectively are required in order to achieve balance, which did not happen. This means that the deficit will increase, even though the government has always been talking about reducing the large deficit, which is exacerbated every year due to wrong economic policies.

 21 - The talk about making the citizen a priority is not realistic, and nothing indicates that. On the contrary, the citizen has become a priority to pay the government only, in the new budget.

22. Through the budget file, it is clear that voting on the Government's work program reveals that this step is futile and has no value, effect or meaning.

23. A number of governmental or quasi-governmental institutions do not include their resources in the general budget, while some of these institutions include only part of their resources and hide other parts. This is repeated by several institutions.

24. Through the implementation of the financial balance project, it has become clear so far that the Government is unable to implement a project professionally and equitably.

Third: demands to reform the process of preparing and passing the general state budget

25- Re-produce and re-distribute wealth and the budget according to an advanced national vision based on partnership in order to achieve integrity and transparency professionally and according to the level of challenges, pressures and financial conditions that besiege Bahrain

26- Forming a national body for integrity and combating corruption, which ensures the establishment of institutional bases for monitoring and comprehensive examination of all imports and expenditures

27- The budget of recurrent military and security expenditures accounts for 35%, and the education, health, housing and community services sectors are allocated only 25% of the state budget.

28 - Bahrain needs to begin transferring part of the military and security budgets to education, health and social assistance sectors. Military and security budgets acquire BD 914 million per year, BD 200 million of which could be transferred in 2019 and BD 250 million in 2020 to other vital and service sectors such as housing, education and health.

29. Government revenues resulting from foreign investments are almost none compared to the cost of facilitations and government support provided to them, which calls for the need to have a vision to take advantage of foreign investment as one of the sources of the state general budget.

30. Increasing the budget of projects from 200 million dinars to 350 million dinars in 2019 and to 400 million dinars in 2020 increases the vitality of important sectors such as construction and services, which will affect the local economy of the country.

31. The need for comprehensive political reform, which is the only guarantee for consolidating the principle of social justice, separation of powers, regulation of the proper passing of the general budget and the existence of popular supervision over it.

Arabic Version