It had to happen, Bahrain was living beyond it means, the debt kept growing. And to keep the credit rating, drastic steps had had to be taken, like getting a VAT, and despite howls of protest about its “complexities,” how it would effect everyone, so calls from some people, to return to subsidies.
One “wise-guy” 20-year-old, opined in the GDN, that it should only relate to expats!
Get real you”luminaries,” Bahrain was going down the fiscal gurgle, reserves diminishing, the debt was increasing.
As President Clinton chided the American people, “it’s all about the economy stupid.”
A few years ago, in the UK, prime minister Harold Macmillan chided the British people “you’ve never had it so good”
Well a few years ago, exactly that applied to Bahrain.
The “good old subsidy days,” when so much was subsidised and the price of fuel was cheaper than water.
And in time, that caught up with Bahrain.
The situation became increasingly desperate.
So Bahrain turned to its colleagues in the GCC, Saudi Arabia, Kuwait, the UAE, and they came up with a generous package of loans, deposits and grants, to help restore fiscal balance.
There are of course conditions, and the assistance is aimed at support to redress the fiscal balance, to grow the economy, by encouraging investment so that the loans can in time, eventually be repaid.
Wise heads in Bahrain, have therefore imposed a number of spending cuts to reduce the debt, to bring the budget back into balance by 2022.
There will be a reduction in government expenditure, a more efficient civil service, encourage more bureaucrats to take early retirement, stricter vetting of government processes, reducing expenditure on utilities, giving greater encouragement for savings.
And of course the introduction of VAT, to bring in much needed revenue.
Yes, it will drive up the cost of consumer durables, such as televisions, electronic equipment including things like mobile phones, but nevertheless, a long list of exemptions, existing mainly on foods.
It will drive up service industry costs in restaurants, hotels, travel industry, real estate and a host of others, but hey, welcome to the world!
Many countries that have introduced VAT, built it into the “price of getting things done,” not always pleasant when you are used to those costs simply being absorbed into pricing and not the attraction of duty-free purchase.
The issue of wages and salaries as a measure of compensation, will always be an issue, and certainly there will be pressure from unions and consumers.
That is a good thing, but also requires businesses to be more efficient, and generate more jobs, economic growth, and trickle-down benefits resulting in wage increases.
Much good news about Bahrain in recent days about leading GCC growth by over three per cent, particularly in the non-oil sector economic performance as noted by the government and the IMF.
And no doubt, potential investors.