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Tue 31 Dec 2013 02:33 PM

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Bahrain's gov't subsidies reach $3bn a year

Deputy PM says state discounts for petrol, food should be axed for expats

Bahrain's gov't subsidies reach $3bn a year
Bahrain has seen near daily protests since the start of the unrest in early 2011

The cost of state-provided subsidies in Bahrain has soared by 73 percent in the past five years, to BD1.126bn ($2.99bn) per year, the government has revealed.

Deputy Prime Minister Shaikh Khalid bin Abdullah Al Khalifa said the mammoth expenditure would continue to plague the state budget unless measures were taken to remove or reduce them, indicating they would soon no longer apply to expatriates.

The subsidy system, which provides significant discounts for items such as petrol and some food stuffs, has been in place since the 1980s, when the population was half of its present 1.3m, of which more than half are expatriates.

The government confirmed last week it would reduce subsidies for petrol but said it did not currently have plans to cut them for other essential items despite warnings the cheaper prices led to excessive use and put unnecessary strain on the state budget.

Confirming the petrol price hike, Bahraini government spokesperson Sameera Rajab said petrol prices in the island kingdom were among the cheapest in the Gulf and led to black market exports.

“The price rise is an instrument to deter smuggling," she said.

The IMF has repeatedly urged Gulf countries to reduce energy subsidies, and has said Bahrain’s budget deficit will widen to 5 percent of gross domestic product next year, almost double the 2012 gap.

Bahraini MPs – who claim they were not consulted about the petrol price rise and fear it will be detrimental to citizens – and the government are due to discuss a subsidies plan during meetings next week.

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