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Mon 3 Mar 2008 10:26 AM

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Bahrain to fastrack allowances in inflation flight

Prime minister also calls for urgent review of customs and taxes to reduce cost of living.

Bahrain to fastrack allowances in inflation flight
FAST TRACK: Creeping inflation has forced Bahrain to consider lowering taxes on basic foods and medicines. (Getty Images)

Bahrain's prime minister on Sunday ordered the government to fast track a $106 million allowance scheme and look at slashing customs and taxes to offset the effects of inflation.

Chairing a weekly cabinet meeting, Sheikh Khalifa bin Salman Al Khalifa told the government to begin the necessary arrangements to guarantee delivery of the scheme by March 15 at the latest, quoted the official Bahrain News Agency.

The cabinet urged parliament to approve a draft law as soon as possible setting aside funds for the scheme as part of this year's budget.

Sheikh Khalifa also called on the industry and commerce, works and finance ministries to review customs tariffs on food, medicines and basic materials and taxes on various other goods and services that have contributed to inflation in the Gulf state.

The prime minister’s remarks came a day after official inflation figures released by the Central Informatics Organisation (CIO) revealed inflation had hit 4.64% in January, up from 4.07% in December.

Food and tobacco prices leapt over 2%, while housing costs, widely considered a main driver of inflation in the kingdom, remained stable, the CIO said.

The price of oil, the Gulf’s major export, has shot up five-fold in the past six years, saddling the region with a massive liquidity glut.

Gross domestic product (GDP) - a broad metric used to measure the strength of an economy - has tipped double digits in some GCC states, pushing demand for goods and services higher.

Bahrain’s currency, like most of its neighbours, is pegged to the plummeting US dollar. This affords GCC states little opportunity to employ inflation-fighting tools as they are obliged to follow the rate-cutting measures taken by the US Federal Reserve.

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