The Bahrain budget for 2005-06, which was approved by the House of Representatives (elected parliament) on 5 July, was passed by the Consultative Council (Majlis al-Shura) on 13 July and is now ready for the final approval by Bahrain’s King Hamad bin 'Isa Al Khalifa. The two-year budget projects total expenditure of BD3,040mn ($8,064mn) – BD1,462mn ($3,878mn) for 2005 and BD1,578mn ($4,186mn) for 2006 – an increase of 29% from BD2,348mn ($6,228mn) in 2003-04 and total revenue of BD2,529mn ($6,708mn) – BD1,254mn ($3,326mn) for 2005 and BD1,275mn ($3,382mn) for 2006 – an increase of 58% from BD1,603mn ($4,252mn) in 2003-04. The resulting deficit is projected at BD511mn ($1,355mn) which is 31% lower than the projected deficit of BD745mn ($1,976mn) in 2003-04 (MEES, 23 June 2003). Expenditure in 2005-06 consists of BD2,135mn ($5,663mn) for ordinary spending and BD905mn ($2,400mn) for development projects – BD418mn ($1,109mn) for 2005 and BD487mn ($1,291mn).

The budget this year did not include on the revenue side the income from the 50,000 b/d of crude oil from the Abu Sa'fah field which Saudi Arabia had given as a gift to Bahrain on a temporary basis. The Bahrain Finance and National Economy Minister Shaikh Ahmad bin Muhammad Al Khalifa said the loss of the 50,000 b/d would hit the country’s revenue. Abu Sa'fah is jointly owned by Bahrain and Saudi Arabia and its output is averaging 300,000 b/d, of which Bahrain’s share is 50%. But Abu Sa'fah production is marketed by Saudi Aramco. The chairman of parliament’s finance and economic committee Jihad Bukamal announced in May that oil revenue in the 2005-06 budget would be based on an oil price assumption of $30/B (MEES, 23 May), a conservative estimate with today’s oil prices. The budget includes income of BD20mn ($53mn) from the profit earned by the majority state-owned Aluminium Bahrain (Alba). There have been recent calls in parliament to allocate 25% of Alba’s profit of $1bn annually to the budget. During the latest budget debate at the Consultative Council it emerged that Alba had in fact transferred $72mn from its profit to Bahrain’s state reserve.  

Cuts In Ordinary Expenditure

The parliament has approved a recommendation of the finance and economic committee to impose cuts of 5-10% on ordinary expenditure by various ministries and government organizations. It also called for the privatization of services not essential for the running of the country and voted to gradually phase out funding for government organizations and services which could be run commercially like broadcasting and printing. To set an example the elected parliament has also agreed to cut its budget and that of the Consultative Council by 10%. Although full details of the expenditure allocations have not been announced, housing projects will receive BD90mn ($236mn) in each of 2005 and 2006 and the Ministry of Electricity and Water will be allocated BD75mn ($199mn) in 2005 and BD63mn ($167mn) in 2006 for the construction of new power transmission stations, maintenance of the Rifai power plant and the expansion of the Ibn Jarjur water desalination plant. Commenting on the two-year budget the Chairman of the Bahrain Chamber of Commerce and Industry Khalid Muhammad Kanoo said the record development allocation of BD905mn ($2,400mn) reflected the government’s commitment to bring about social and economic development in the country.      

High Oil Revenue Lowers 2003-04 Budget Deficit

Although the 2003-04 budget did in fact project a deficit of BD745mn ($1,976mn), high oil revenue in 2003 and 2004 wiped out this deficit, according to Bahrain’s former Finance and National Economy Minister 'Abd Allah Saif in a statement to parliament on 14 December 2004 (MEES, 3 January). In 2003 the government planned for oil revenues of BD490mn ($1,300mn) but the actual figure had been BD836mn ($2,218mn), and in 2004 budgeted oil revenue was set at BD490mn ($1,300mn) but the actual for the first nine months of the year was BD693mn ($1,838mn). Bahrain’s GDP at fixed prices increased to BD3,237mn ($8,586mn) in 2004 from BD2,307mn ($6,119mn) in 2003 according to recent statistics.