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You Want Meat?

The controversial removal of meat subsidies in Bahrain will be lifted starting from (September) 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 materialize. Why give up a cushy job?

Like other Gulf Arab oil exporters, Bahrain subsidizes 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 neighbors.

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.

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 aluminum 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 mechanisms 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 all subsidies and even introduce  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.