Bahrain to cut government spending by 30%

Bahrain has approved steps to cut government expenditure by 30 per cent in an effort to weather the period of low oil prices.

The country is implementing a new programme that will focus on “streamlining government expenditure, redistributing government subsidies, and a series of economic reforms and infrastructure projects worth more than $32bn to increase investment and growth”, the government said in statement.

The new programme will also examine ways of slashing the government’s administrative spending and will focus on redirecting the saved amount to areas that can provide economic returns, the statement added.

Bahrain, one of the worst hit by the recent drop in oil prices, had already begun work in this area as it merged 10 government entities to cut costs. Through this initiative, officials said that they aimed to reduce the number of government agencies from 23 to 16.

These measures come after the Gulf country established a special task force in October 2015 to look at potential areas to reduce expenditure. Some of the areas reviewed included the maintenance of the government buildings, travel expenses borne by the public sector, property rental costs, information technology spending, advertisement costs and efficient use of medical equipment.

Such spending cuts are indicative that the Gulf Cooperation Council countries are feeling the heat of low oil prices, which have dipped below $40 per barrel in recent days.

In October this year, Saudi Arabia was reported to have ordered a series of cost cutting measures. The finance ministry reportedly asked government departments to not hand out any new contracts and to freeze any appointments or refrain from issuing promotions in the fourth quarter. The ministry also banned any new vehicle purchases or property rentals by government departments.

A recent report by credit ratings services Moody’s predicted that a consistent spell of low oil prices will likely pressure the GCC governments’ fiscal and current account balances. Its findings were based on the fact that oil prices will take longer to recover due to a mismatch in demand and supply.