It was clear from the outset that Bahraini forecasts relating to the fiscal years 2015 and 2016 would not be sustainable given the projected deficits. The shortfall is put at $3.9 billion (Dh14.34 billion) in 2015, rising to $4.1 billion in 2016 against the actual deficit of $1.2 billion in 2014.

The projected deficits for 2015 and 2016 represent about 41 per cent of total spending and more than 12 per cent of the gross domestic product, and clearly problem areas requiring solutions. These also violate one criteria of the Gulf Monetary Union (GMU) scheme, which restricts budget deficits to 3 per cent of GDP.

State spending remains steady as government expenditures account for 30 per cent of the GDP, and the maintenance of which is of such importance for the country’s economic well-being. Total expenditures for 2015 and 2016 are projected at $9.4 billion and $9.8 billion versus $9.3 billion in 2014. The concerns related to the receipts, in turn set at $5.5 billion in 2015 and $5.7 billion in 2016 compared to $8.1 billion in 2014.

Still, these figures exclude commitments made by Kuwait, the UAE and Saudi Arabia to support Bahrain’s economy as part of a regional fund. In 2011, the Gulf Cooperation Council (GCC) agreed to grant Bahrain and Oman a sum of $10 billion each spanning a 10-year period to help the member states cope with socioeconomic demands.

Economic diversification in Bahrain continues to be a challenge. The petroleum sector, including crude oil and refined products, is projected to constitute around 87 per cent of total revenues in 2015 and 2016. Petroleum exports make up about 85 per cent of total exports. Clearly, these facts undermine claims of economic diversification.

Nonetheless, authorities refer to the oil sector as making up only around a quarter of the GDP to support the argument of economic diversification. The credit for this is reserved for the financial services sector for being the main GDP contributor. Bahrain is a primary regional hub for banks doing business in the GCC and beyond.

Bahrain stands out among GCC countries for issuing budgets for two consecutive fiscal years. The intention is to grant potential investors details about the direction in governmental spending plans.

Ostensibly, Bahrain can afford doing so by virtue of being a relatively small economy. Bahrain has a GDP of just above $30 billion, around 3 per cent of the combined GDP of GCC countries.

Officials have assumed an average oil price of $60 per barrel for the new two-year budgets, down from $90 per barrel in 2013-14. This is in line with prevailing market rates. Additional revenues to suppress fiscal shortages ought to emerge from other sources.

The first issue that needs to be addresses is that of subsidies for red meat. A fresh governmental plan calls for scrapping meat subsidies starting in August, not long after the end of the Eid festive.

A formula is being developed where qualified Bahraini nationals would receive financial support as a compensation for end of the red meat subsidy. The subsidy was estimated at $135 million in 2014, or 7 per cent of the total cost from the subsidy programme, which also extend to those on petroleum products and utilities.

There remains the possibility that the end of red meat subsidy would herald a new era for economic reforms in Bahrain.

The writer is a Member of Parliament in Bahrain.