Bahrain's fiscal 2007 results were a replica of what has been happening in the past few years, namely the turning of projected deficit into surplus. This was achieved through a combination of higher revenue and declining expenditure.

Total revenue increased by 23 per cent to $5.4 billion on the back of firm oil prices in international markets. The petroleum industry accounted for 80 per cent of total income, as opposed to 74 per cent in the projected budget. Still, oil and gas sector contributed 77 per cent of treasury revenue in 2006.

Bahrain generates its petroleum revenue from sale of crude oil from both offshore and onshore fields, plus gas. The Abu Saafa field, which is shared with Saudi Arabia, accounted for 77 per cent of total oil revenue. Bahrain's own onshore field contributed around 14 per cent of oil income. Sale of gas accounted for the balance.

The government calculated the 2006 budget on the basis of $40 per barrel. As such, actual oil income suggests an average price of nearly $53 per barrel.

Bah Real oil and gas increased by 32 per cent to $4.3 billion. Bahrain authorities follow a conservative policy on income, fearing extraordinary developments in the oil market.

However, several members of parliament, including your writer, had demanded explanation from the ministry of finance for lower than expected jump in oil revenue on the back of firm prices throughout 2007.

Yet, despite stronger revenue, actual expenditure dropped by 11 per cent $4.8 billion. Thus, the government has not maintained planned spending, let alone had the opportunity to increase expenditures on the back of firmer revenue.

Current spending, covering matters such as compensation of public sector employees, accounted for 67 per cent of total expenditures. The balance was left for capital projects, notably on development of road network and housing schemes.


To be sure, government spending is essential for stimulating economic activity. Public expenditures account for more than one-third of the gross domestic product (GDP).

Also, private sector investors in Bahrain take the lead from the government; thereby stronger public sector only sends the right signal, and vice versa. Public spending is vital for addressing challenges such as those of finding jobs for locals.

Stronger income together with lower income helped reversing projected shortfall into a surplus. Thus, instead of recording a $984 million deficit, the budget succeeded in registering $579 million real surplus.

As suggested earlier, results of 2007 are a replica of what happened in 2006. Total income increased by 44 per cent while real expenditure declined by eight per cent in 2005.

The results confirmed that oil remains the primary source of income despite claims of economic diversifications.

Petroleum exports accounted for three quarters of total exports last year. However, authorities refer to the share of oil and gas sector when they talk about diversification. The sector accounted for 15 per of GDP in constant prices as opposed to 27 per cent in current prices.

The financial services sector tops GDP in constant prices, adjusted for inflation. Clearly, the authorities have along way to achieve the announced goal of diversifying the economy.

Bahrain prepares budgets for two fiscal years concurrently. The budgets for 2007 and 2008 were prepared during the second half of 2006. Not surprisingly, MPs have called on the authorities to end this practice on the grounds of repeatedly failing to stick to original figures mainly due to changing oil prices.

Still, lawmakers like to have the opportunity to revise spending to help address pressing problem..

The writer is a Member of Parliament in Bahrain.