Tag Archives subsidies

You want meat?

You want meat?

The controversial removal of meat subsidies in Bahrain will be lifted starting from tomorrow and parliament has given up the fight to have the subsidy reinstated. Had they done their job properly as they are sworn to do, they would have had a serious look at all the subsidies offered by the government to various sectors when they were reviewing the government plan for the next few years. They should have also combed through the budget professionally and raised flags of objection, or at least call for better clarifications and expenditure; thus, pretend at least to exercise their oversight role. What Bahrain did get from this parliament; however, was a white flag of surrender – as expected – allowing the government to disregard their thundering tantrums and promises of resignations, which of course will never materialise. Why give up a cushy job?

Like other Gulf Arab oil exporters, Bahrain subsidises goods and utilities including meat, fuel, electricity and water, keeping prices ultra-low to buy social peace.

But since oil prices plunged last year, slashing state revenues, the subsidies have become increasingly hard for governments to afford – especially in Bahrain, which has smaller oil and financial reserves than its neighbours.

So the government announced last month that it would remove subsidies on meat from Sept. 1, allowing domestic prices to rise and compensating Bahraini citizens – but not foreigners, who comprise about half of the population of roughly 1.3 million – with cash payments.

Reuters

What are the subsidies offered by the government I hear you ask? Well, here’s an overview (pdf) of those scheduled in the 2015/2016 budget and I also provide a comparative look at the 2011/2012 budgeted subsidies.

Bahrain 2011/2012 Subsidies Table
2011/2012 Subsidies Table
Bahrain 2015/2016 Subsidies Table
2015/2016 Subsidies Table

If you look at the food subsidy in Bahrain, the government is looking to save approximately BD24 million (US$ 63m) by 2016; however the electricity and water subsidy will increase to approximately BD65 million by then too. Apart from that not making sense to my simple brain, I’d like to know how the biggest subsidy in that schedule is actually apportioned? My understanding is a good chunk of that directly supports industry in natural gas subsidies that presumably goes to ALBA, the aluminium smelter, and other industries like it.

Of course I understand that the government must react to the appreciable drop of oil prices which is its main source of income, and I appreciate that it has put in mechanism to defray the cost increase on meats by offering citizens alone a monthly stipend and of course I thank them for their generosity, but I wonder if other subsidies should have been lifted first? Unless of course this is an initial foray into the lifting of other subsidies in the years to come, and the removal of subsidies on meat is to prepare the populace? Will the government ultimately be removing of all subsidies and even introduce of taxation to meet the increasing budgetary deficit?

I don’t have a crystal ball, but I’m willing to put in a bet that this scenario is actually closer than many people think. It’s because of this that we need much better oversight with a parliament whose members are much more aware of fiscal requirements, have the necessary understanding of budgets and fiscal policies, and also have the necessary tools to exercise proper oversight on government and its spending. Ultimately, we need a parliament which is much more accountable to those who elected them. However, had I that same crystal ball, it might well tell me that the latter just won’t happen.

In the mean time, register here to receive the subsidy if you’re a Bahraini, and here’s some meat to fill you up in the mean time.

Dig in!

camel feast for one - Camel feast in (presumably) Saudi. The upside of the removal of meat subsidies is that we'll never have this sort of excess in Bahrain.
Camel feast in (presumably) Saudi. The upside of the removal of meat subsidies is that we’ll hopefully never have this sort of excess in Bahrain. Ever.

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The price of petrol… and beans

Both, it seems are about to rise. And rise appreciably. The government – bless their souls – have had enough pumping good money into various subsidies which – they finally realised – benefits both the haves and the have-nots.

In fact, they just benefit the haves and even finance various businesses too via the subsidised goods, the price of shawarma for instance remains “reasonable” due to the ready availability of subsidized meats, bread and vegetables too.

So, the test balloons have been released over the last couple of weeks via “judicious” press leaks – well, if you consider four-pound hammers cracking a walnut judicious, that is – and now over the last couple of days, they just came out and said it: the subsidies will be of the past very soon. The government no longer has the luxury of dedicating some BD200 million a year to do just that. The first commodity to be hit will be the Mumtaz fuel it seems. Then it will roll down on to other commodities.

The premise the government is throwing at us is that they will ensure that those in need will be taken care of and subsidies will be routed appropriately. They’re a bit sketchy on this little detail of course, but I’m sure the CIO will once again pull that proverbial rabbit out of their hat. Or, maybe, they’ll put the “smart card” to use. Coupled with the deep data mining they are capable of, they wouldn’t be too taxed in finding those who are actually in need.

Some skeptics are not convinced of the motives and are less so about the implementation. I can’t say that I don’t agree for the details are anything but crystal. I would be very happy if this newly elected parliament with its greater number of “independents” a lot of whom are businessmen would look at the budget and plans acutely. They need to, and they need to hold the government to account and press it for full transparency – especially the black hole which is the CIO – to ensure that funds are put where they belong, and routed to those who deserve them.

The ballpark is now set for the next four years of parliament I think… it will be a more vociferous fight about money, which is distasteful if not coupled with real demands for full governmental disclosure and transparency.

Let the games begin, I say. It should be fun.

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Subsidies Subsidies

Bahraini Prime Minister

I’m still a bit confused from reading various reports yesterday of the government subsidising basic necessities to the tune of BD500 million (US$1.326 billion) a year. Of that staggering figure, we know that BD12 million are spent on subsidising meat, poultry and flour.

Okay, that is good in that it keeps prices of necessities low, it’s not good economic sense I don’t think, there are other more effective ways to get these subsidies to the people who need it most (ration cards of coupons would do better I think) as these blanket subsidies offered would apply to multimillionaires and rock-bottom poor people too. I think it would be much more effective actually to raise the education level, work ethics, and provide jobs. The old adage “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for life.” should be taken to heart and implemented.

Apart from that, a question begs to be asked: where does the remaining BD488 million go? And if only 12 million suffices for providing reasonable prices for the basic necessities, what else is actually subsidised? Lipstick? Deodorant? Soap? Alfalfa?

What constitutes a dire necessity that the government takes away that huge figure – which is almost equivalent to the total infrastructure projects budget the government got approved but never fully used in 2005?

I know I’m no economist, but simple maths is all that is necessary here. When HH the PM declares that staggering budget but only specifies how 2.4% of the total sum is applied, a multitude of questions are raised, and it behooves our parliamentarians to seek their answers. Apart from those present at HH’s majlis, included the press, who should have questioned HH even just a little bit to get him to explain these figures a bit more.

I hope that parliament will correct this situation by tabling a question to HH’s office to seek a full explanation of the subsidies strategy adopted by the government and what actually constitutes a basic necessity deserving of this subsidy. I wonder too if this figure is actually approved in the national budget, because if it had and no red flags were raised, then we do have a problem on our hands.

I feel that this must be a mistake in recording the figure or that it has been taken out of context, but none of the papers I read this morning so far offer this avenue of escape. Half a billion Dinars on subsidies? This is insane!

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