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Wed 21 Sep 2011 07:40 AM

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Bahrain to spend $1bn more on public sector salaries

Gulf state signs off additional two-year budget spend for government employees

Bahrain to spend $1bn more on public sector salaries
King Hamad bin Isa Al Khalifa of Bahrain. The Gulf state has ramped up spending in the wake of widespread unrest

Bahrain has approved an additional budget spending of BD388.5m
($1.03bn) over two years to cover wage increases for government employees, the
state news agency BNA said on Tuesday, following social unrest earlier this

Upheaval that has spread across the Middle East, toppling
long-time autocratic leaders in Egypt, Tunisia and Libya has prompted
governments to hand out billions in an effort to create jobs and offset rising
living costs.

Of the total sum, BD96.9m will be spent in 2011 and the rest
in 2012, according to a decree issued by King Hamad bin Isa al-Khalifa.

This will be used to improve the wages and living standards
of state employees and retirees, as well as providing more funds to government
bodies and bolstering reserves, BNA said.

The king's decree follows the government's approval in
August of extra budget spending worth BD325m to cover an increase in public
sector salaries.

Facing a rising subsidies bill, the small non-OPEC energy
producer has the weakest fiscal position among Gulf Arab neighbours with a
budget breakeven oil price at around $100 per barrel.

The country has planned a 2011 budget expenditure of BD3.1bn
on revenues of BD2.3bn. The budget was based on an oil price estimate of $80
per barrel.

That put the planned budget shortfall at BD835.7m, or 10.1
percent of gross domestic product.

In May, Bahrain's parliament approved a 44 percent rise in
government spending in 2011-2012 compared to the previous two-year period after
the country went in March through its worst unrest since the 1990s.

Robust oil prices are seen alleviating some of the spending
pressure this year. However, Bahrain is the only Gulf state projected to see a
budget deficit in 2011.

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