Office set up to manage debts

A NEW office has been set up for debt management, an official has revealed.

Finance and National Economy Ministry Under-Secretary Yousif Humood said it was continuously assessing government debt and suggesting necessary options.

He told the Shura Council during its weekly session yesterday that a ministerial committee has also been formed to reduce spending and increase revenues.

The ministry told the chamber’s financial and economic affairs committee earlier that Bahrain’s borrowing reached BD13 billion at the end of last year.

Bahrain’s current government debt constitutes around 118 per cent of its gross domestic product (GDP).

Shura members unanimously approved a decree issued by His Majesty King Hamad during the National Assembly recess to amend the 1977 Bonds Law to increase the ceiling of borrowing to BD15bn.

“The continued deficit and repayment of current loans and interest on them requires further borrowing,” said Mr Humood.

“Experts in the new office are helping us control the deficit and provide us with updates on borrowing options,” he added.

“The office has also helped us secure bonds at 50 per cent lower interest than normal, while also identifying available cash sources in the market.”

He said currently Bahrain has a ‘B+ stable’ international credit rating.

“If the deficit continues to be high, the outcome will be negative in the ratings, so we have formed a ministerial committee to reduce spending in line with the Fiscal Balancing Programme we want to achieve by the end of next year.

“In general, we are safe internationally but a higher credit rating is our target.”

Mr Humood said the government had to resort to borrowing to protect public interests.

“We are working to restructure revenues and spending as the country continues with its sustainable development programme, and if we need to borrow we will be forced to do that.”

Shura financial and economic affairs committee chairman Khalid Al Maskati said there were various quick financial management options, but the government didn’t want to take that approach.

The options include raising the rate of value-added tax (VAT) from the current 5pc, introduce income tax and impose levies on companies.

“Increasing non-oil revenues through taxation is a fast option, but us legislators are against this and thankfully the government shares the same sentiment and has not gone through this route,” he said.

Out of the BD13bn borrowed last year, the government has not used BD673m.

However, the government expects borrowing to reach BD14.9bn by the end of next year.

Shura Council chairman Ali Saleh Al Saleh said Bahrain, like other countries, was facing a financial crisis and economic slowdown.

“We (legislators) are seeking two polarising solutions, each as difficult as the other,” he said.

“Control the deficit and protect public welfare. The government wanted to give the private sector a chance to take up work and push up the economy.

“What happened with Covid-19 and a slump in oil prices made the survival of the private sector and people dependant on the government and borrowing was the best option.”

Shura Council first vice-chairman Jamal Fakhro said the ministry has presented ideas to control existing debt and not solutions to stop debt.

“The B+ rating is like 14 out of 20 which is low and there has to be real solutions to go up in the rating,” he said.

Source: https://www.gdnonline.com/Details/938990/Office-set-up-to-manage-debts