Bahrain announces $16bn expansionary budget

02 June 2011

Stimulus announced as state of emergency comes to an end

Bahrain has announced that it plans to spend BD6.2bn ($16.4bn) as part of an expansionary budget over the next two years to help stimulate the economy after more than three months of unrest following anti-government protests.

The budget was up from an originally proposed figure of BD5.25bn.

King Hamad bin Isa al-Khalifa unveiled the budget in the wake of announcing the lifting of the state of emergency on 1 June, that had been introduced on 15 March to end the anti-government protests.

The budget covers fiscal years 2011 and 2012 and estimates revenues of BD4.6bn, with BD2.287bn of that in 2011. Expenditure is also front-loaded, with BD3.123bn planned to be spent in 2011 and BD3.075bn budgeted in 2012.

Project expenditure is estimated at BD1.335bn, with BD635m spent in 2011 and BD700m spent in 2012. That is up from the BD1.105bn originally tabled by the Finance Ministry. The government has allocated BD360m for housing projects.

The budget will leave the country with a BD835m deficit in 2011 and BD726m deficit in 2012, which will be covered by loans from “financial institutions and the Arab Islamic Fund”.

King Hamad said in a speech that “the goal is to stimulate productivity, boost competitiveness, encourage and attract investments and enhance human resource efficiency”.

Sources in Bahrain had been expecting the government to announce an expansionary budget in order to kick-start the economy. However, it is unclear if the budget contains spending proposals for the $10bn aid package provided to Bahrain by other members of the GCC (MEED 29:04:11).

The economy has suffered in the wake of the protest movement and subsequent crackdown, with ratings agency Moody’s Investors Services downgraded the country to Baa1 on 26 May. The agency said that political protests had weakened the country’s growth prospects and public finances, increased the breakeven oil price, and had a negative impact on the strength of the banking sector, which provides around quarter of the island’s gross domestic product (GDP).

The king also announced plans to hold a national dialogue with opposition groups starting in July. However, clashes between youths and security forces were reported on the first day after the lifting of the emergency law. Police are reported to have fired tear gas and shotguns on small groups of protesters in Shia villages outside of the capital, Manama.

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