Bahrain Economic Development Board chief executive Khalid Al Rumaihi said that lower oil prices have 'forced' reforms to subsidies that should have taken place long ago
Lower oil prices over the last several years are a “blessing in disguise” that’s forced the “right behaviour” from governments and the private sector across the Gulf, according to Khalid Al Rumaihi, the chief executive of the Bahrain Economic Development Board.
Speaking at the GCC Financial Forum in Manama, Al Rumaihi said that lower oil prices have ensured that “governments have to look at changing their revenue cost mix.”
“When oil prices were at $100, you could afford to have budgets that spent a certain way,” he said. “As oil prices declined, budget deficits have mushroomed all over the Gulf and they’ve had to adjust accordingly.
“It’s forcing the right behaviour. It’s forcing reforms that should have taken place awhile back.”
As an example, he pointed to Bahrain’s electricity sector, in which many Bahraini families and businesses have traditionally had subsidised electricity for which they pay considerably less than the cost of production.
“What the government did, wisely, was say that Bahrainis in their first house will continue to benefit from subsidised electricity,” he said.
“If you have a second home, you’re pretty well off and will end paying [the true market value]. If you have a business, you should be paying at least the cost of production. It’s forcing people to pay the true price of utilities.”
Al Rumaihi added that “industries are complaining” about having to pay more without subsidies.
“If you’re a steel manufacturer and you can’t afford the feed stock price, maybe you shouldn’t [operate]. Maybe it was a false pretence for this country. It may make sense for another country,” he added. “We should not be subsidising industries if we won’t have a competitive advantage.”
The next time utility prices will go up, he added, will take place in April 2019.
“Let’s price the utility according to cost and let’s let the private sector adjust,” he said.