A QUARTER of Bahrain’s population faces serious hardship and may ultimately be forced to leave as a result of rising costs of living, according to an economist.
That is based on official government data showing 387,170 people, out of a total population of 1.5 million, earn less than BD200 every month.
A Labour Market Regulatory Authority (LMRA) report for the second quarter of 2017 stated the overwhelming majority (99 per cent) were expatriates, although 3,221 of them were Bahrainis.
JAFCON Consultants for Productivity Improvement chief executive and owner, Dr Akbar Jaffari, said there was no way people could continue to survive on such low wages when subsidy cuts – which are driving up fuel, power and water costs – and new taxes were factored into the equation.
Income
“If we look at these figures the main group that will be affected is low-income workers who earn less than BD200,” Dr Jaffari told the GDN.
“With this income, if we deduct 5pc for Value Added Tax (VAT), rent – including utility bills – and petrol or transportation charges, the worker (who earns BD200) will be left with about BD100 – from which he also has to remit money to his family.”
He warned such people may choose to leave, rather than see such a massive portion of their income spent on living costs, unless there were real efforts to introduce pay increases for the country’s lowest earners.
“There should be a major rethink by companies and stern government efforts to increase salaries of low-income workers, irrespective of their nationalities, or else we will see them slowly disappearing from our economy,” said Dr Jaffari.
Expatriates in particular remain vulnerable, since they are already exposed to rising costs of water and power as part of phased annual rate increases that started in 2016 and end next year.
Utility rates are set to rise again for expats, as well as the private sector, on March 1 – while Bahrainis with one home are exempt.
A revamp of the current subsidy system and social welfare programmes could also hit expatriates hardest, with early talks between the government and MPs suggesting any alternative would only benefit Bahrainis.
Yet Dr Jaffari also predicted “turbulent” times ahead for both Bahrainis and expats as they get used to new taxes, higher costs of living and reduced disposable income.
However, he was more optimistic about people’s ability to adapt the more they earned.
“The transition period will be turbulent, but people (earning more than BD200) will get used to the new fees gradually – like they did when fuel prices were first increased last year,” he said.
Initiatives to overhaul the subsidy system started in 2015, but have gained paced this month as the government looks to reduce its spending, balance the budget and tackle rising public debt.
Bahrain budgeted to spend a total of BD621 million on subsidies last year alone, in addition to the BD382.5m spent on social welfare programmes.
Moves to replace the existing model, as well as the introduction of a new excise duty on December 30, the anticipated rollout of VAT this year, a shock petrol price increase this month and other increases in government fees, are all part of an austerity drive caused by low oil prices and the subsequent drop in national revenues.
Economic researcher Dr Abdulla Al Sadiq said he expected inflation to rise as a result.
However, Bahrain Centre for Strategic, International and Energy Studies (Derasat) international and geo-political studies director Omar Al Ubaydli expects Bahrainis to receive direct compensation payments if there is any decision to scrap subsidies.
A similar measure was adopted in October 2015, when Bahrainis started receiving a food allowance when the meat subsidy was lifted.
He said authorities may also consider a more market-oriented approach to determining prices.
“One policy the government has likely considered is the eventual phasing out of fuel subsidies, which would mean the price being determined by global fuel prices – similar to the UK or the UAE,” said Mr Al Ubaydli.
sandy@gdn.com.bh
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