2022 Portfolios: Billions in Surpluses Diverted to Secret Budgets as Citizens' Living Standards Decline
2023-12-07 - 3:16 م
Bahrain Mirror (2022 Portfolios): In 2022, Bahrain's government amassed financial surpluses with the rise in oil prices, yet failed to implement measures to address the inflation's impact on citizens' livelihoods in a country where the gap between the rich and the poor continues to widen.
While the International Monetary Fund (IMF) stated that Bahrain's revenues would increase by up to 40%, the government did not disclose the extent of the financial surpluses in its budget.
Finance Minister Salman bin Khalifa Al Khalifa provided very modest figures last August, claiming that Bahrain achieved a surplus of only 33 million dinars. In contrast, the IMF estimated the financial surpluses resulting from the oil price hike to be around 3 billion dinars.
More than 2.9 billion dinars remain undisclosed by the government until the end of the year. This is in addition to the significant profits the government gained from the soaring prices of aluminum.
The government set the oil price in the national budget for 2022 at $50 per barrel, but the average price reached about $103 per barrel by the end of the year.
Instead of contributing to the country's budget, these surpluses were used to accumulate more debt. Public debt increased by at least 5%, reaching around 17 billion dinars, surpassing the government's approved debt ceiling of 15 billion dinars.
This means that the government borrowed funds it did not necessarily need, with these funds likely going to secret budgets for the ruling family or defense.
The increase in public debt will raise the debt interest payments made by the government, estimated at around 757 million dinars - the largest item in the current general budget expenditures, exacerbating financial burdens.
Instead of alleviating the burden on citizens, the government approved an increase in the value-added tax (VAT) to 10% from 5%.
This increase will double the tax revenues from 360 million dinars to 720 million dinars. The government rejected proposals to suspend the tax increase in light of rising oil prices, aiming to improve citizens' living conditions.
Citizens bore the brunt of falling oil prices in previous years, but they reaped no benefits when prices rose this year.
In 2022, Bahrain experienced unprecedented inflation in the prices of essential goods, directly impacting citizens' living conditions.
According to international estimates, food prices rose by about 60%, while Gulf countries sought to mitigate the effects of this increase through aid and wage increases, initiatives not adopted in Bahrain.
As citizens complained about rising prices and their inability to afford basic necessities, the Finance Minister claimed that the purchasing power of the dinar had increased. The Ministry of Commerce justified the increase in commodity prices by citing the rising costs of supply chains.
Simply put, citizens found themselves on the losing end, as they suffered losses when oil prices fell in previous years and were left without gains when prices rose this year. The ruling family secured financial surpluses, leaving citizens at the mercy of greedy merchants without oversight.