Interview: Sheikh Ahmed bin Mohammed Al Khalifa
What does the level of interest in Bahrain’s issue of sovereign bonds in 2013 say about investors’ attitudes to the Kingdom and its prospects?
SHEIKH AHMED BIN MOHAMMED AL KHLIFA: Bahrain returned to the international debt markets in 2013 with a $1.5bn 10-year Eurobond, which was five times oversubscribed. Government Development Bonds are part of the mix of instruments used by the government to finance budgetary deficits. The oversubscription of the offering issued by the Ministry of Finance (MoF) and the Central Bank of Bahrain, and managed by our banking partners, is a demonstration of confidence in Bahrain’s economy and financial sector, and a recognition of the country’s high levels of competitiveness and its attractiveness to investors.
How is the MoF mitigating the risks associated with volatile oil prices and what assumptions has the MoF made about the future of oil prices?
SHEIKH AHMED: Oil prices are never stable nor entirely predictable, as they are influenced by many financial, economic and political factors. The MoF is fully aware of these considerations and is dealing with them, firstly by assuming a prudent level of oil prices in planning Bahrain’s biennial budget ($90 per barrel for the 2013-14 budget), and secondly through fiscal consolidation measures that are coordinated with the legislative authority.
To what extent is the subdued nature of the Euro-zone recovery impacting Bahraini growth?
SHEIKH AHMED: Changes in growth in the Eurozone have relevance to the overall outlook of the global economy, which in turn affects Bahrain’s economy and the economies of our neighbours. Positive developments in the Eurozone will help maintain favourable oil prices in international markets by stimulating demand. The MoF has been following the pace of the Eurozone recovery closely and hopes that Europe will regain full momentum in the near future.
Are changes to the subsidy policy being planned, and, if so, when are we likely to see changes?
SHEIKH AHMED: The guiding principle regarding subsidies is to secure access to basic goods and services for all sectors of society, particularly the needy and low-income segments. In this respect, government subsidies are still economically relevant and represent a requirement for fairness and social cohesion. Bahrain is undertaking a comprehensive evaluation of its policies to retarget subsidies at the lower-income segments of the population.
How is the MoF encouraging growth in Bahrain’s non-oil sectors, and what more needs to be done?
SHEIKH AHMED: Economic diversification has always been a major priority for the government, and indicators here are encouraging. The average contribution of the oil and gas sector to GDP in the last few years has remained at around 20%, with the other 80% being provided by a wide range of sectors such as the financial sector, downstream industries, government services, transport, construction, real estate and commerce. The government is encouraging small and medium-sized enterprises, and the spirit of entrepreneurship as a whole, through an integrated network of support lines providing technical and financial assistance. A major asset in this context is the Gulf Development Programme, a scheme to support development projects in Bahrain in vital sectors.
What opportunities will regional infrastructure spending bring to investors in Bahrain?
SHEIKH AHMED: Economic cooperation is one of the main pillars of the GCC. Any project that adds a new airport, road network, industrial zone or power plant to any of the member states is also an asset to Bahrain, as this creates further demand for our exports. The country benefits from regional projects by virtue of its position as a gateway for investors looking to enter the $1.6trn regional GCC economy.
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