BJDM spoke to Dr. Jasim Hussain, the former member of parliament and leading Bahraini economist. BJDM sat down with Dr. Jasim to discuss the current economic outlook, following 5 years of political crisis.
BJDM: What is your outlook for the economic situation after the drop in oil prices in Bahrain?
Dr. Jasim Husain: The Bahraini economy has been damaged; however, the situation is not bad. The economic situation is being managed. The Bahraini economy deteriorated due to the effect of the oil sector on the public treasury, which contributes to ¾ of the treasury income; i.e. the first provider for public expenses.
The drop in oil prices negatively affects the revenues of the public treasury and the expenses as a result. There is now a drop in the revenues and at the same time there is no significant reduction in the expenditures. The government, of course, needs this funding. In this case, the funding comes now through raising the ceilings of public debt, as it reached more than 10 billion BD (more than 26 billion USD), which accounts to more than 60% of the GDP.
Since Bahrain is an important country in the Gulf, it receives financial support from Kuwait and Saudi Arabia. This support compensates for some of the loss caused as a result of the drop in oil prices.
BJDM: How can this drop in oil prices affect the lives of citizens?
Dr. Jasim Husain: Due to the drop in oil prices, the government sees it must take some measures to reduce the expenditures or increase the revenues. We are talking here about putting a limit to employment in the public sector. The government does not talk about increasing the salaries; however, there is an orientation to reduce the subsidies on some commodities and services, starting with decreasing the subsidies on meat, poultry and maybe later on energy derivatives and electricity. Of course, an average citizen will feel directly affected by the drop in oil prices.
BJDM: After lifting the lift of subsidies on meat and poultry, what is next, in your opinion, noting that the government has decided to lift the subsidies on electricity but the resolution was not approved yet and is to be approved in 2016?
Dr. Jasim Husain: Bahrain grants subsidies on a group of commodities and services. It grants subsidies on meat, poultry and flour. The government has begun lifting subsidies on meat and poultry to some extent. It seems that there is no orientation to lift subsidies on flour. This step is considered so dangerous, as the flour directly affects the prices of bread and the lives of citizens and tourists at the same time.
The subsidies on flour is not that much, the largest rate of subsidies is on meat. Until now, people are getting used to the meat issue, but they are still at the beginning.
BJDM: How can we say that people are adjusting, when we saw the Manama butchers go on strike for almost 50 days?
Dr. Jasim Husain: There are alternatives. People resort to fish and vegetables. However, if the government decided to lift the subsidies on electricity and water, there will be a real problem.
BJDM: Do you expect that the government will lift subsidies on water and electricity?
Dr. Jasim Husain: I expect that the government will gradually lift subsidies on water and electricity. However, this will cause real damages, as there are no alternatives for water and electricity. If the government proceeds in this measure, the people will be obliged to change their lifestyles. Multiple families will have to live in the same home, for example.
There is also the issue of lifting the subsidies on oil derivatives or fuels, where the alternatives are also limited. The public transportation can be an alternative but it is not a solution. If the government decided to lift the subsidies on oil derivatives or fuel, people will also have to change their lifestyles; which is not easy.
On the other hand, I think the government will increase the fees within a group of measures; reducing the subsidies as well as raising the fees to increase revenues.
BJDM: Do you think that the current political crisis that Bahrain is witnessing affects the economic situation? Which one affects the other, the political crisis or the economic situation?
Dr. Jasim Husain: Of course, the political crisis affects the attraction of investments and tourists. The challenge in Bahrain is rather political than economic. No one attacks tourists, visitors and companies.
However, there is a link between the current political crisis and economic situation. They both affect one another; the deterioration of the economic situation can be a cause for the political crisis and vice versa.
The economic situation is difficult in Bahrain because there is unemployment.
BJDM: Did the political crisis affect unemployment? Did the rates of unemployment increase after the crisis?
Dr. Jasim Husain: No, unemployment was one of the causes that led to the political crisis. The social and economic situation contributed to the eruption of the issue.
I think we can say that unemployment increased after the crisis and was not a result thereof. The crisis increased the challenges to fight unemployment and having job opportunities for the citizens.
BJDM: How do you see Bahrain’s economic future amid all the current situations and challenges?
Dr. Jasim Husain: I can refer to the stances and reports of some institutions like Standards and Poor’s, Fitch and Moody’s. Standards and Poor’s did not change the outlook on Bahrain’s economy; however, it confirmed its future negative outlook due to the public debt, not addressing the current crisis and difficulty in decreasing the governmental expenses besides the budget deficit. The situation is difficult and may worsen due to the drop in oil prices.
BJDM: Do you think there are certain suggestions that can contribute to solving this economic crisis?
Dr. Jasim Husain: The opposition’s stance, specifically Al-Wefaq, is very good regarding this situation. Al-Wefaq has announced that it is ready to take part in solving this economic challenge. This, of course, requires dialogue and partnership. It is also good that the opposition is ready to find solutions for the political, economic and social problems.
The political assistant of Al-Wefaq’s Secretary-General and senior figure in the society, Khalil Al-Marzooq, said that the society is always ready to offer help in this regards.
We need to hold a dialogue. The opposition is ready to participate and it has several ideas to find solutions for the challenges that Bahrain is facing. The situation is difficult but it can be solved with the presence of a moderate opposition that is ready to offer solutions.