BAHRAIN: Subsidy Cuts to Affect Expats

Bahrain has announced plans to cut subsidies for consumer goods and services across the Kingdom in order to offset government spending on subsidies that are seen to primarily benefit foreign nationals and companies. Instead, the government will redirect spending directly to Bahraini citizens by way of cash payments in an effort to counteract the burden of inflation placed on consumer goods and services.

In reference to Bahrain”s rising budget deficit, the Minister of State for Information Affairs, Mr Isa bin Abdulrahman al-Hammadi, explained that “now the government borrows to support citizens only” as “the majority of beneficiaries from subsidy of consumer goods and services are foreign nationals resident in the kingdom and companies.”

As with many oil exporting countries in the region, expatriates make up almost half of Bahrain”s population and currently benefit from the same consumer subsidies enjoyed by Bahraini citizens. Under the planned subsidy cuts, consumer costs for goods and services, such as meat, water, fuel and electricity, would be set to increase, primarily affecting the cost of living for the expatriate population. Conversely, companies would likely need to consider increasing wages and/or living allowances for their expatriate employees in an effort to counteract any such increase in costs.

While the Bahraini government has yet to announce the timeframe and the extent of implementing the planned subsidy cuts there is a growing concern that the rise of consumer goods and services could affect the competitiveness of companies who rely on a primarily expatriate workforce in Bahrain.

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