It goes without saying that cutting subsidies is a politically sensitive task for any government. But in the case of the Gulf’s oil producing countries, there really is no alternative.
So it has been surprising to see several MPs in Bahrain disrupting parliament to protest against a Cabinet decision to increase fuel prices. Parliamentary sittings have twice had to be cancelled, on January 11 and 19, because of unruly behaviour or a lack of quorum.
MP Jamal Dawood has argued the decision — taken without a parliamentary vote — would “make the poor poorer”, according to quotes in Gulf Daily News.
There are two arguments here. One is the idea that Bahraini citizens cannot afford to pay higher prices (the price of ‘super’ fuel rose 60 percent to $0.42 per litre, while regular fuel went up 39 percent to $0.33 per litre from January 12); while the other contests that the government made the decision without consulting the full parliament.
“The decision ignored that there’s a parliament. We should resign,” MP Mohammed Al Amadi was quoted as saying.
The protest is unusual for the Bahraini parliament in recent times, particularly given that the Shi’a-led opposition boycotted the 2014 parliamentary election. While at face value it is fair to expect changes that affect the state budget to be debated, it seems immature to be protesting against crucial fuel price hikes — a decision that has already been implemented in Saudi Arabia, the UAE and Oman, without any public fanfare.
Any sensible politician — or citizen, for that matter — would recognise that Bahrain is in a serious economic predicament — but one that can be improved with mature and well thought-out changes to government spending. It is right to have its $3bn subsidy programme at the top of the priority list. Subsidies were implemented more than 30 years ago as a method of distributing state wealth from what was at the time lucrative oil revenues. With those revenues having dwindled by more than 60 percent and the country forecasting a 66 percent deficit increase to $13.2bn this year, the case for subsidies has well and truly been worn out.
Opponents to the new fuel prices need to face reality, to take the words of the International Monetary Fund (IMF), which last week warned that cutting government spending and reducing subsidies were necessary steps for oil-rich Gulf nations to adjust to the “new reality” of lower crude prices.
There are also, of course, environmental incentives to reduce fuel subsidies. Every gallon of gas burned by a vehicle emits nearly 25 pounds of carbon dioxide and other global-warming gases into the atmosphere, according to US scientists.
When petrol is so cheap that it is practically free there is no incentive to reduce driving and therefore greenhouse gas emissions. As the rest of the world accepts the first-ever universal, legally binding global climate deal, reached in Paris last month, the protesting Bahraini MPs must also recognise the necessity of making drivers pay the real price for fuel.
But the MPs have made one move that should be applauded. When the government revealed on December 28 that it would introduce a new pricing system for diesel and kerosene, some MPs said they would seek a guarantee from the government that revenues raised from higher petrol prices would directly benefit citizens.
In an op-ed published in January 2014, I argued that savings from subsidy cuts should be funnelled into public transport infrastructure, among other important services. This argument remains, however, the government has probably acted too slowly to be able to re-deploy the savings towards other projects in the short-term; the money will purely absorb some of the expanding deficit.
With this in mind, it would be sensible for Bahraini lawmakers — and those of all GCC states — to recognise the current quagmire and act rapidly to contain the deficit as quickly as possible. Only then can they begin to protest against government savings.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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