By Shane McGinley
Gulf Arab kingdom's expenditure to result in a deficit of $2.216bn in 2011 and $1.92bn in 2012
Bahrain is to spend over $16bn and run up a deficit of over $12bn over the next two fiscal years as it struggles to rebuilding its economy from the ongoing political unrest that has plagued the country.
On Wednesday, the same day the King Hamad Bin Isa Al Khalifa announced an end to martial law in the island state, he announced the country’s plan to get the country’s economy back on track.
Total expenditure for the two years was estimated at BHD3,123,577,000 ($8.2bn) for 2011 and BHD3,075,015,000 ($8.15bn) for 2012, a total of BHD6,198,592,000 ($16.4bn).
With revenue for the two years estimated at BHD4,635,911,000 ($12.29bn), the budget for 2011 will result in a deficit of BHD835,696,000 ($2.216bn) for 2011 and BHD726,985,000 ($1.92bn) for 2012.
The deficit will be covered through a loan from both financial institutes and the Arab Islamic Fund, the Bahrain News Agency said in a statement.
In May, Bahrain’s credit rating was lowered one level at Moody’s Investors Service with a negative outlook, citing the impact of the recent political turmoil on economic growth and the weakening of the banking industry.
Bahrain’s government bond rating was reduced to Baa1, the third lowest investment grade, from A3, the ratings service said in an e-mailed statement.
“The main driver underlying Moody’s decision to downgrade is the significant deterioration in Bahrain’s political environment since February,” Moody's said in the statement.
The island-kingdom saw anti-government protests in February and March, inspired by revolts that toppled the leaders of Egypt and Tunisia this year. The protests prompted members of the Gulf Cooperation Council to send a military force to help restore order.
Bahrain’s economic growth may slow to 3.1 percent this year from 4.1 percent in 2010, the International Monetary Fund said in its Economic Outlook in April.
Bahrain's crown prince, widely seen as a moderate, said last week he was committed to the reform path and said the Gulf state would listen to both domestic and international concerns.
The injection of cash into the economy is an attempt by the authorities to reinvigorate its business community and boost economic activity.
The kingdom is also keen to reinstate its prestigious Formula One race. The March event was scrapped because of the unrest, but the kingdom is in talks to reinstate it to the racing calendar later this year.
It's sad to see this happen to Bahrain, a country we personally love & miss. We have many Bahraini friends there, including our ex landlord! There is discrimination against the Shia by the govt so the protests were understandable & hopefully Sh. Salman continues reform as stated in your article, but at a faster pace. HOWEVER, a small proportion of the protesters were violent, aggressive & radical resulting in deaths of protesters & police. They have not done any favour to their cause or Bahrain, which is now in deficit & can less afford to reform, build housing, pay pensions & grants etc. Work this out peacefully folks or you'll be isolated by the world & deteriorate into another Yemen/Chad/Somalia. (South African ex resident left in Feb 2010)