Identifier
Created
Classification
Origin
06MANAMA1418
2006-08-02 16:00:00
CONFIDENTIAL
Embassy Manama
Cable title:
BY THE NUMBERS: BAHRAIN'S 2007-08 BUDGET
how-toVZCZCXRO8458 PP RUEHDE DE RUEHMK #1418/01 2141600 ZNY CCCCC ZZH P 021600Z AUG 06 FM AMEMBASSY MANAMA TO RUEHC/SECSTATE WASHDC PRIORITY 5360 INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY RHBVAKS/COMUSNAVCENT PRIORITY RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RUCPDOC/USDOC WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 MANAMA 001418
SIPDIS
SIPDIS
EB, NEA/ARP
E.O. 12958: DECL: 07/25/2016
TAGS: ECON EFIN PGOV BA POL ECTRD
SUBJECT: BY THE NUMBERS: BAHRAIN'S 2007-08 BUDGET
REF: A. MANAMA 1214
B. 05 MANAMA 1581
C. 05 MANAMA 900
Classified By: CDA Susan L. Ziadeh, reasons 1.4 (b) and (d).
-------
SUMMARY
-------
C O N F I D E N T I A L SECTION 01 OF 03 MANAMA 001418
SIPDIS
SIPDIS
EB, NEA/ARP
E.O. 12958: DECL: 07/25/2016
TAGS: ECON EFIN PGOV BA POL ECTRD
SUBJECT: BY THE NUMBERS: BAHRAIN'S 2007-08 BUDGET
REF: A. MANAMA 1214
B. 05 MANAMA 1581
C. 05 MANAMA 900
Classified By: CDA Susan L. Ziadeh, reasons 1.4 (b) and (d).
--------------
SUMMARY
--------------
1. (C) The King July 20 signed the GOB's biannual 2007-08
budget. The two-year budget was the subject of significant
controversy because it was introduced to both councils of
parliament on a "fast-track" basis (Ref. A). Buoyed by
rising oil prices, it provides for sizable increases in urban
development, education, and social spending. In addition,
the Ministry of Housing and Public Works will receive
substantial project funding for housing creation. However,
it is unclear whether electricity and water infrastructure
has been funded to keep pace with growing development.
Funding for mortgage lending has also been generously
addressed. The Ministry of Information tops the list of
operating budget recipients. The 2007-08 budget demonstrates
increased GOB transparency, though room for improvement
remains. End Summary.
--------------
FAST-TRACK BUDGET RATIFIED
--------------
2. (U) The King July 20 signed the GOB's 2007-08 budget. It
had been passed unanimously July 15 by the Shura
(Consultative) Council (Bahrain's appointed upper house).
The two-year budget was the subject of significant
controversy, principally because it was introduced on a
"fast-track" basis. Though the Shura Council complied with
the fifteen-day time constraint imposed by "fast-track," many
expressed the hope that this would be the last time they
would be called upon to consider a national budget on such an
expedited basis.
3. (U) Bahrain has a continuing infrastructure development
agenda, oil prices are high, and 2006 is an election year for
the Council of Representatives (COR, the elected lower house
of parliament). In addition, both COR Members and the GOB
are keen to address a housing shortage that has been a bone
of contention among even the middle class. These factors
have all combined this year to drive an expansionary fiscal
policy for 2007-08, as evidenced by a 21.8 percent increase
in spending over that allotted under the previous two-year
budget. Urban development, education, and social spending
top the government's priorities.
--------------
OIL REVENUE BONANZA
--------------
4. (U) The Prime Minister July 2 described the 2007-08 budget
as "the most comprehensive and significant in Bahrain's
history, boosting Bahraini citizens' standard of living,
housing, educational, health, and social services."
Budgetary expenditures, which will support these and other
projects, are spread evenly between the two fiscal years. Of
the total BD 3.79 billion expenditures allocated, BD 1.89
billion will be spent in 2007, with the remaining BD 1.9
billion expended in 2008. (Note: the Bahraini dinar is
pegged to the U.S. dollar at BD 1 to USD 2.66 End Note.)
The budget forecasts BD 2.84 billion in revenues, reflecting
a BD 950 million deficit. However, the deficit has little
practical meaning, since it assumes a crude oil market price
of USD 40 per barrel. (Note: Petroleum processing revenues
accounted for 76 percent of the GOB's income in FY 2005. End
note.)
5. (U) Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa
defended the USD 40 per barrel budgetary estimate before the
Shura, noting it was the highest in Bahrain's history. He
said that, although the figure was lower than current world
prices, it represented a hedge against future fluctuations
that could lead the price of oil downward. He promised that
actual oil revenues would be disclosed in the 2007-2008
closing budgets. (Note: The FY 2005 budget had forecast a BD
203 million deficit, based on USD 30 per barrel of oil. In
fact, the year closed with BD 672 million in surplus
revenues. End Note.)
--------------
MANAMA 00001418 002 OF 003
EDUCATION ADVANCED
--------------
6. (U) Providing context for the budget's education
expenditures, the Prime Minister said, "the government's firm
belief that the overall boost being witnessed by the kingdom
on all economic, political, and social levels necessitates
further investment in human resources." (Note: When Economic
Development Board Chief Executive Shaikh Mohammed Bin Isa
Al-Khalifa presented the GOB's economic reform blueprint
October 2005 he said reforming Bahrain's education system was
a critical factor for Bahrain's economic survival, as the
country strives to maintain and/or boost its competitiveness
in key sectors, including financial services, information
technology, healthcare services, telecommunications, tourism
and training services (Ref. B). End Note.) Bahrain
University will get an additional BD 3.74 million for 2007.
Funding for overseas scholarships has been doubled to BD 7
million. The GOB projects that this will provide funding for
some 1583 high-achieving students. In line with the GOB's
E-education initiative, an additional BD 2 million has been
earmarked for computing equipment and instructional
materials, largely to be sourced by Microsoft.
--------------
HOUSING HIGHLIGHTED
--------------
7. (U) Ministry allocations related to infrastructure reflect
a recent trend in housing development, addressing a major
bone of contention among even the middle class. BD 374.84
million is to be directed toward projects under the Ministry
of Housing and Public Works, and BD 197.82 million has been
allocated to the Ministry of Electricity and Water, though
Shura Council Finance Committee Secretary Khalid Al Maskati
questioned whether this was sufficient to support the
country's rapid commercial and residential development. The
budget also provides an extra BD 30 million for home loan
financing. In addition, families on the housing waiting list
for five years or more will receive BD 14 million between
them in allowances next year.
8. (U) The GOB has placed significant emphasis on urban
development and housing creation in the Central Governorate
and northern portions of the Southern Governorate. (Note:
The Southern Governorate, including Hawar, constitutes
roughly two-thirds of Bahrain's land mass. However, largely
because it encompasses Bahrain's proven and exploratory
oilfields, it remains the least populated of the country's
five governorates. Nevertheless, it is the site of some
important development, including the Al Areen Resort, the
Riffa Views residential/commercial complex and the
newly-constructed National Stadium. End Note.) Development
in the immediate area of the recently-approved Bahrain-Qatar
Causeway will also be particularly important once
construction commences in 2008. More sewage networks and
roads will also be built, especially in newly residential
areas, which are still waiting for infrastructure enhancement.
--------------
SOCIAL SPENDING SURGE
--------------
9. (U) Funding for social services has also been generously
addressed. Financial aid for the disabled will be doubled
next year to BD 2.2 million, social welfare payments will be
doubled to BD 8.4 million and an extra BD 2.85 million will
be provided in other social aid. A further BD 15 million
will finance early retirement for Bahraini government
workers. In addition, a one-time BD 300 bonus will be paid
on January 1 to retired government and private sector workers
on pensions of BD 700 a month or less, at a cost of BD 5.6
million.
--------------
MOI: A KEY BENEFICIARY
--------------
10. (C) The Ministry of Information will receive substantial
funding for continuous expenditures, more than any other
ministry. Over fiscal 2007-08, BD 701 million, or roughly 25
percent of the continuous expenditure budget, will be devoted
to the daily upkeep of the ministry. The continuous
expenditures will mainly go to salaries for staff, including
that of the Bahrain News Agency, Bahrain Radio, Bahrain TV.
The Ministry of Information also supports culture and tourism
programs that in other countries would be implemented by a
MANAMA 00001418 003 OF 003
ministry of culture or tourism. Ministry censors screen
print and entertainment media for Islamic decency code
violations. The ministry also monitors and enforces the
protection of intellectual property rights. (Note: Ministry
of Information operations are broadly viewed as expensive,
bloated and inefficient. Despite the ministry's large
budgetary allotment, rumors persist that an announcement of
the GOB's reorganization of the ministry is in the offing.
Key functions of the ministry would be privatized or
reassigned. End Note.)
--------------
QUESTIONS REMAIN
--------------
11. (U) The 2007-08 budget did not address notable fiscal
factors. For example, during Finance Committee
deliberations, Shura Council member Al Maskati complained
that the budget should have included pension funds, which are
estimated to have a BD 2 billion budget deficit. Maskati
also noted that the budget is silent on the GOB's foreign
investment and whether or not it is profitable.
--------------
COMMENT
--------------
12. (C) The GOB's agreement to increase the forecast price of
oil to 40 dollars per barrel represents progress in a drive
begun in 2005, when the COR first openly challenged the GOB
on its custom of calculating oil revenues based on overly
conservative prices and then using the surplus income for
discretionary development projects (Ref. C). However, there
is clearly room for greater transparency. Even taking into
account an expected increase in global refining capacity by
late 2007, the GOB forecast stands at more than 25 percent
below predictions of respected market analysts. Although
actual oil revenues will subsequently be reported, it is
unclear if there will be adequate accountability for the
disposition of those funds. End Comment.
********************************************* ********
Visit Embassy Manama's Classified Website:
http://www.state.sgov.gov/p/nea/manama/
********************************************* ********
ZIADEH
SIPDIS
SIPDIS
EB, NEA/ARP
E.O. 12958: DECL: 07/25/2016
TAGS: ECON EFIN PGOV BA POL ECTRD
SUBJECT: BY THE NUMBERS: BAHRAIN'S 2007-08 BUDGET
REF: A. MANAMA 1214
B. 05 MANAMA 1581
C. 05 MANAMA 900
Classified By: CDA Susan L. Ziadeh, reasons 1.4 (b) and (d).
--------------
SUMMARY
--------------
1. (C) The King July 20 signed the GOB's biannual 2007-08
budget. The two-year budget was the subject of significant
controversy because it was introduced to both councils of
parliament on a "fast-track" basis (Ref. A). Buoyed by
rising oil prices, it provides for sizable increases in urban
development, education, and social spending. In addition,
the Ministry of Housing and Public Works will receive
substantial project funding for housing creation. However,
it is unclear whether electricity and water infrastructure
has been funded to keep pace with growing development.
Funding for mortgage lending has also been generously
addressed. The Ministry of Information tops the list of
operating budget recipients. The 2007-08 budget demonstrates
increased GOB transparency, though room for improvement
remains. End Summary.
--------------
FAST-TRACK BUDGET RATIFIED
--------------
2. (U) The King July 20 signed the GOB's 2007-08 budget. It
had been passed unanimously July 15 by the Shura
(Consultative) Council (Bahrain's appointed upper house).
The two-year budget was the subject of significant
controversy, principally because it was introduced on a
"fast-track" basis. Though the Shura Council complied with
the fifteen-day time constraint imposed by "fast-track," many
expressed the hope that this would be the last time they
would be called upon to consider a national budget on such an
expedited basis.
3. (U) Bahrain has a continuing infrastructure development
agenda, oil prices are high, and 2006 is an election year for
the Council of Representatives (COR, the elected lower house
of parliament). In addition, both COR Members and the GOB
are keen to address a housing shortage that has been a bone
of contention among even the middle class. These factors
have all combined this year to drive an expansionary fiscal
policy for 2007-08, as evidenced by a 21.8 percent increase
in spending over that allotted under the previous two-year
budget. Urban development, education, and social spending
top the government's priorities.
--------------
OIL REVENUE BONANZA
--------------
4. (U) The Prime Minister July 2 described the 2007-08 budget
as "the most comprehensive and significant in Bahrain's
history, boosting Bahraini citizens' standard of living,
housing, educational, health, and social services."
Budgetary expenditures, which will support these and other
projects, are spread evenly between the two fiscal years. Of
the total BD 3.79 billion expenditures allocated, BD 1.89
billion will be spent in 2007, with the remaining BD 1.9
billion expended in 2008. (Note: the Bahraini dinar is
pegged to the U.S. dollar at BD 1 to USD 2.66 End Note.)
The budget forecasts BD 2.84 billion in revenues, reflecting
a BD 950 million deficit. However, the deficit has little
practical meaning, since it assumes a crude oil market price
of USD 40 per barrel. (Note: Petroleum processing revenues
accounted for 76 percent of the GOB's income in FY 2005. End
note.)
5. (U) Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa
defended the USD 40 per barrel budgetary estimate before the
Shura, noting it was the highest in Bahrain's history. He
said that, although the figure was lower than current world
prices, it represented a hedge against future fluctuations
that could lead the price of oil downward. He promised that
actual oil revenues would be disclosed in the 2007-2008
closing budgets. (Note: The FY 2005 budget had forecast a BD
203 million deficit, based on USD 30 per barrel of oil. In
fact, the year closed with BD 672 million in surplus
revenues. End Note.)
--------------
MANAMA 00001418 002 OF 003
EDUCATION ADVANCED
--------------
6. (U) Providing context for the budget's education
expenditures, the Prime Minister said, "the government's firm
belief that the overall boost being witnessed by the kingdom
on all economic, political, and social levels necessitates
further investment in human resources." (Note: When Economic
Development Board Chief Executive Shaikh Mohammed Bin Isa
Al-Khalifa presented the GOB's economic reform blueprint
October 2005 he said reforming Bahrain's education system was
a critical factor for Bahrain's economic survival, as the
country strives to maintain and/or boost its competitiveness
in key sectors, including financial services, information
technology, healthcare services, telecommunications, tourism
and training services (Ref. B). End Note.) Bahrain
University will get an additional BD 3.74 million for 2007.
Funding for overseas scholarships has been doubled to BD 7
million. The GOB projects that this will provide funding for
some 1583 high-achieving students. In line with the GOB's
E-education initiative, an additional BD 2 million has been
earmarked for computing equipment and instructional
materials, largely to be sourced by Microsoft.
--------------
HOUSING HIGHLIGHTED
--------------
7. (U) Ministry allocations related to infrastructure reflect
a recent trend in housing development, addressing a major
bone of contention among even the middle class. BD 374.84
million is to be directed toward projects under the Ministry
of Housing and Public Works, and BD 197.82 million has been
allocated to the Ministry of Electricity and Water, though
Shura Council Finance Committee Secretary Khalid Al Maskati
questioned whether this was sufficient to support the
country's rapid commercial and residential development. The
budget also provides an extra BD 30 million for home loan
financing. In addition, families on the housing waiting list
for five years or more will receive BD 14 million between
them in allowances next year.
8. (U) The GOB has placed significant emphasis on urban
development and housing creation in the Central Governorate
and northern portions of the Southern Governorate. (Note:
The Southern Governorate, including Hawar, constitutes
roughly two-thirds of Bahrain's land mass. However, largely
because it encompasses Bahrain's proven and exploratory
oilfields, it remains the least populated of the country's
five governorates. Nevertheless, it is the site of some
important development, including the Al Areen Resort, the
Riffa Views residential/commercial complex and the
newly-constructed National Stadium. End Note.) Development
in the immediate area of the recently-approved Bahrain-Qatar
Causeway will also be particularly important once
construction commences in 2008. More sewage networks and
roads will also be built, especially in newly residential
areas, which are still waiting for infrastructure enhancement.
--------------
SOCIAL SPENDING SURGE
--------------
9. (U) Funding for social services has also been generously
addressed. Financial aid for the disabled will be doubled
next year to BD 2.2 million, social welfare payments will be
doubled to BD 8.4 million and an extra BD 2.85 million will
be provided in other social aid. A further BD 15 million
will finance early retirement for Bahraini government
workers. In addition, a one-time BD 300 bonus will be paid
on January 1 to retired government and private sector workers
on pensions of BD 700 a month or less, at a cost of BD 5.6
million.
--------------
MOI: A KEY BENEFICIARY
--------------
10. (C) The Ministry of Information will receive substantial
funding for continuous expenditures, more than any other
ministry. Over fiscal 2007-08, BD 701 million, or roughly 25
percent of the continuous expenditure budget, will be devoted
to the daily upkeep of the ministry. The continuous
expenditures will mainly go to salaries for staff, including
that of the Bahrain News Agency, Bahrain Radio, Bahrain TV.
The Ministry of Information also supports culture and tourism
programs that in other countries would be implemented by a
MANAMA 00001418 003 OF 003
ministry of culture or tourism. Ministry censors screen
print and entertainment media for Islamic decency code
violations. The ministry also monitors and enforces the
protection of intellectual property rights. (Note: Ministry
of Information operations are broadly viewed as expensive,
bloated and inefficient. Despite the ministry's large
budgetary allotment, rumors persist that an announcement of
the GOB's reorganization of the ministry is in the offing.
Key functions of the ministry would be privatized or
reassigned. End Note.)
--------------
QUESTIONS REMAIN
--------------
11. (U) The 2007-08 budget did not address notable fiscal
factors. For example, during Finance Committee
deliberations, Shura Council member Al Maskati complained
that the budget should have included pension funds, which are
estimated to have a BD 2 billion budget deficit. Maskati
also noted that the budget is silent on the GOB's foreign
investment and whether or not it is profitable.
--------------
COMMENT
--------------
12. (C) The GOB's agreement to increase the forecast price of
oil to 40 dollars per barrel represents progress in a drive
begun in 2005, when the COR first openly challenged the GOB
on its custom of calculating oil revenues based on overly
conservative prices and then using the surplus income for
discretionary development projects (Ref. C). However, there
is clearly room for greater transparency. Even taking into
account an expected increase in global refining capacity by
late 2007, the GOB forecast stands at more than 25 percent
below predictions of respected market analysts. Although
actual oil revenues will subsequently be reported, it is
unclear if there will be adequate accountability for the
disposition of those funds. End Comment.
********************************************* ********
Visit Embassy Manama's Classified Website:
http://www.state.sgov.gov/p/nea/manama/
********************************************* ********
ZIADEH