Based on an oil price of $18 a barrel, the 2003 deficit was projected at BD 316.9 million instead of BD 260.5 million, and the 2004 projection rose to BD 331 million from BD 266.9 million. Spending for 2003 is budgeted at BD 1,114 million, compared with the previous figure of BD 1,050.5 million, and for 2004, BD 1,137 million compared with BD 1,061.9 million. Forecast state revenues are set at BD 797 million for 2003 and BD 806 million for 2004.

Oil accounts for about 54 per cent of government revenue, but resources are dwindling and the government is pursuing a programme of economic diversification. In previous years budgets had been based on a projected oil price of $14 a barrel, and such conservative forecasting had seen actual revenues outstrip those predicted by a considerable margin (MEED 15:6:02). Government finances in Bahrain are undergoing major changes, as a sovereign loan signed earlier in 2002, three large project-related borrowing, and an imminent $500 million debut sovereign bond, will increase liabilities by about $3,500 million, or 40 per cent of gross domestic product (GDP) (MEED 25:10:02).