Bahrain government rejects parliament’s subsidy reform plan

DUBAI (Rahnuma): Bahrain’s government has rejected parliament’s proposals to reform allowances paid to Bahrainis squeezed by years of austerity on the grounds that they would break government spending caps, lawmakers said.

After oil prices fell in 2014, pressuring state finances, Bahrain cut subsidies and raised taxes and fees to control its deficit. But the austerity has angered some Bahrainis and prompted a backlash in parliament.

Bahrain, which lacks the ample oil reserves of fellow Gulf states, has held off on fresh austerity measures, such as the introduction of value-added tax, until parliament agrees on a new system to compensate low- and middle-income citizens for increases in the cost of living.

The proposal submitted by parliament would have required an increase in government spending at a time when Bahrain is struggling with a current account gap and a large deficit, which have dragged down prices of its bonds and weighed on the dinar.

“The government has indeed asked us to review our proposal,” Jamal Fakhrou, the head of parliament’s technical commission in charge of the reform, told Reuters.

He said the government had explained it did not plan to raise direct cash allocations for subsidies in the next two years above the 382 million dinars ($1.01 billion) budgeted for 2018.

Another member of the House of Representatives, who declined to be named, said government officials were concerned that the proposal did not take into account a growing population, which would mean the cost of the program would rise in future years.

The new subsidies proposal, published by parliament earlier this month, recommends including meat subsidies and a cost of living allowance in a single package and increasing the size of that package for both working and retired Bahrainis.

It would provide 150 dinars for Bahrainis earning less than 300 dinars a month — up from 100 dinars in the old system — 100 dinars for those earning up to 700, and 75 dinars for those earning up to 1,000, officials said.
The proposal also included an additional allowance of 50 dinars for citizens earning between 1,001 and 1,200 dinars.

Some lawmakers said it could be difficult to reach agreement on a revised system that would satisfy both sides.
“One side will have to give concessions because the ultimate goal is to serve the citizens,” Fakhrou said.

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