Despite strong calls from the government to reconsider, MPs unanimously approved a parliamentary bill capping government borrowing at 60% of gross domestic product (GDP). The proposal by five parliamentarians, led by Second Deputy Speaker Ahmed Karata, aims to manage Bahrain’s borrowings, which reached BD16.7 billion by the end of last year. In September of this year, His Majesty King Hamad issued a Royal Decree amending the 1977 Development Bond Law and setting the upper limit at BD16 billion. Mr. Calata said this bill represents a future when the government stabilizes the economy.
“Borrowing reached 115% of GDP not too long ago, but has since fallen to 101%, which is worrying in both cases,” he said, adding that “we need to reduce public debt by 10% every year. The plan is to do so by 2026, after which this bill should be introduced.” “We are not looking for chaos and parliamentarians understand the stabilization process,” Abdulnabi Salman, First Deputy Speaker of Parliament, also commented, adding that the amount of borrowing directly and indirectly reached BD25 billion. He claimed that there was. Zainab Abdullamir, head of the Parliamentary Finance and Economic Committee, suggested that the solution is to impose a corporate tax and a remittance tax. Meanwhile, Ghanim Al Buainain, Minister of Parliamentary and Shura Council Affairs, said that huge efforts are underway in the background to reduce taxes. “MPs say public debt has fallen from 115% to 101%, so there is a huge amount of work to be done, but it will not be easy and it is more complex than anyone imagines,” he said. . “We must always consider the economy and the flow of funds”, things must be placed effectively and researched.
“The Ministry of Finance and National Economy warned that this measure would prevent the government from covering the existing deficit in the budget. “The borrowing amount is already over 60% and the law requires compliance with the cap This will only cripple the government’s finances,” the ministry said. Bahrain’s central bank also said the proposal would impede government functioning. “Public debt stands at 101% of GDP, and just lowering it to 60% would put the government in legal and financial trouble with bondholders. It would be considered illegal.” .
The same bill, introduced by former parliamentarians, was shelved by the Shura Council in 2018 following similar warnings that such a cap would have dire consequences for the economy. Sheikh Ahmed bin Mohammed Al Khalifa, Comptroller General of the State and former Minister of Finance, warned MPs in November 2015 that the 60% cap would lead to large-scale spending cuts that would impact the public. However, lawmakers approved it due to concerns about rising public debt. Bahrain’s Cabinet also objected to the move in a document submitted to the King in February 2016, saying the move would limit the government’s spending powers, prevent the completion of planned projects, and prevent social welfare programs from being completed. It was claimed that services such as
The bill was referred back to Parliament for reconsideration in June 2018, and the following month, MPs approved a government plan to raise the cap from BD 10 billion to BD 13 billion in order to quickly resolve the lagging national budget. However, in the process it significantly exceeded the proposed cap. Negotiations at the time with the Shura Council Finance and Economic Committee. mohammed@gdnmedia.bh
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