Bahrain's Economic Woes: A Country In Distress

Bahrain is a small island nation in West Asia, situated in the Persian Gulf. It is a relatively wealthy country, with the second-highest-valued currency unit in the world. However, there is a significant wealth divide, with a large gap between the rich and the poor. While the country officially reports that 0% of people live below the poverty line, other sources suggest that around 1 in 13 Bahrainis live in poverty. This disparity is largely due to the wage gap and the unequal distribution of wealth, with the poorest 10% of families spending ten times less than the richest 10%. A lack of job opportunities for locals, with many jobs going to immigrants, and restricted access to healthcare for some families, also contribute to poverty in Bahrain.

Inequitable distribution of wealth

Bahrain is a small country in West Asia, situated just off the Persian Gulf. Despite being recognised by the World Bank as a high-income economy, there is a significant wealth divide in the country.

The economy of Bahrain is heavily dependent on oil and gas, with petroleum being the country's most exported product. Oil comprises 85-86% of Bahraini budget revenues, and lower world energy prices in recent years have generated sizable budget deficits. Bahrain has few options for covering these deficits, with low foreign assets and fewer oil resources compared to its Gulf Cooperation Council (GCC) neighbours.

The inequitable distribution of wealth in Bahrain is evident in the spending habits of its citizens. The spending of the poorest 10% of families in Bahrain is ten times less than that of the richest 10%. This disparity reflects the significant imbalance in the distribution of wealth, which is one of the economic and political problems that provoke crises in the country.

The wage gap in Bahrain contributes to the high levels of inequality. Many job opportunities in Bahrain go to immigrants and foreign visitors rather than locals. The Bahraini government does not allow its citizens to take up labour jobs, such as plumbers, electricians, construction workers, or domestic workers. Instead, these jobs are filled by migrant workers from countries with high poverty rates, such as India, Pakistan, Indonesia, and Sri Lanka.

The poverty rate in Bahrain is difficult to determine due to conflicting estimates from international organisations and the government. According to the international organisation ESCWA, the poverty line in Bahrain for a family is 490 dinars, while the government estimates it to be below that amount. According to ESCWA, about 54,000 Bahraini citizens live below the poverty line, representing 7.5% of the total population. This percentage has increased over time and is likely to continue rising due to price inflation and the lack of fair distribution of wealth.

To address the issue of inequitable wealth distribution, ESCWA has recommended implementing a fair and equitable tax system through a direct progressive income tax to support marginalised groups. Additionally, they suggest subsidy reform to reduce the financial burden on the most vulnerable and emphasise the importance of supporting employment opportunities for vulnerable groups.

Poor citizens are deprived of national wealth

Bahrain is a small country in West Asia, situated off the Persian Gulf. It has a strong economy, with the Bahraini Dinar being the second-highest-valued currency unit globally. The country's economy is heavily dependent on oil and gas, with petroleum being its most exported product, accounting for 60% of export receipts, 70% of government revenues, and 11% of GDP. Despite efforts to diversify the economy, oil still comprises 85% of Bahraini budget revenues, and low world energy prices have resulted in substantial budget deficits, such as 10% of GDP in 2017.

While Bahrain is generally considered a wealthy nation, there is a significant wealth divide, with approximately 1 in 13 Bahrainis living below the poverty line. This disparity is due to the inequitable distribution of wealth, where the spending of the poorest 10% of families is ten times less than that of the richest 10%. This inequality is reflected in the differences between the country's small, underdeveloped cities and its large, modern buildings and beautiful cities.

The causes of poverty in Bahrain are nuanced and multifaceted. Firstly, the country's economy is heavily reliant on oil and gas, and fluctuations in the oil industry have a significant impact on the country's financial stability. The attempt to diversify the economy has not been entirely successful, and the country continues to face challenges in boosting its regional competitiveness in industries such as finance and tourism. Additionally, Bahrain has limited options for covering budget deficits due to low foreign assets and fewer oil resources compared to its Gulf Cooperation Council (GCC) neighbors.

The high levels of inequality in Bahrain, largely due to the wage gap, exacerbate the problem of poverty. The opportunity to improve the quality of life for struggling Bahrainis is slim due to the limited job opportunities, many of which go to immigrants and foreign visitors rather than locals. The disparity in spending between rich and poor citizens further highlights the unequal distribution of wealth, with larger groups of people being deprived of national wealth, employment, and decent work.

To address poverty in Bahrain, clear poverty reduction policies are necessary. These policies should focus on fostering an equitable tax system, improving social protection transfer schemes, and investing in citizens' skills to enable a broader segment of the population to benefit from socioeconomic opportunities. Additionally, reforms in land allocation and public procurement policies are essential to ensure that marginalized groups are supported and vulnerable groups have access to decent work opportunities.

Lack of fair distribution of wealth

Bahrain is a small country in West Asia, located off the Persian Gulf. It has a strong economy, with the second-highest-valued currency unit in the world. However, the wealth is not fairly distributed, and this is a significant contributor to the country's poverty.

The country's economy is heavily dependent on oil and gas, with petroleum being the most exported product, accounting for 60% of export receipts, 70% of government revenues, and 11% of GDP. While Bahrain has attempted to diversify its economy, oil still comprises 85-86% of its budget revenues. The country's other major economic activities include the production of aluminium, finance, construction, and tourism.

The reliance on oil has led to budget deficits in recent years due to low world energy prices. In 2017, for instance, Bahrain faced a budget deficit of about 10% of its GDP. The country has few options for covering these deficits due to low foreign assets and limited oil resources compared to its neighbours. As a result, Bahrain's sovereign debt rating was downgraded to "junk" status in 2016.

The disparity in wealth distribution in Bahrain is evident when comparing the spending of the richest and poorest families. The spending of the poorest 10% of families in Bahrain is ten times less than that of the richest 10%. This disparity contributes to the country's high levels of inequality, primarily due to the wage gap.

The lack of fair distribution of wealth in Bahrain has led to a significant difference between international and government estimates of poverty in the country. According to international organisations, about 1 in 13 Bahrainis live below the poverty line, which is a conservative estimate. This rate has increased from 6.8% in 2010 to 7.5% in 2021 and is expected to continue rising due to inflation and the lack of fair wealth distribution.

To address the issue of poverty, Bahrain needs to implement policies that foster an equitable tax system, improve social protection schemes, and reform land allocation and public procurement policies. Investing in citizens' skills and creating more job opportunities, especially for locals, is also crucial.

Poor access to healthcare

Bahrain has recently restricted access to healthcare for some families, which could be a significant factor in the persistence and potential growth of poverty in the country. The availability of free healthcare is statistically linked to lower poverty rates, and Bahrain's recent limitations on free access to public healthcare could therefore negatively impact the country's poverty levels.

The Bahraini government's stance on healthcare access is particularly concerning given the country's already stark wealth inequality. The spending of the poorest 10% of families in Bahrain is ten times less than that of the richest 10%. With such a significant disparity in spending power, many Bahrainis may struggle to afford healthcare without government support.

Moreover, the country's economy is heavily dependent on oil and gas, which are finite resources. While Bahrain has attempted to diversify its economy, these sectors still comprise 85-86% of Bahraini budget revenues. The country's economy is therefore vulnerable to fluctuations in world energy prices, which can generate substantial budget deficits. For instance, in 2016, low oil prices resulted in a budget deficit of $4 billion (14% of the nation's GDP). Such economic instability can have a detrimental knock-on effect on the availability and quality of healthcare services, as well as individuals' ability to afford them.

In addition, Bahrain's labour force is predominantly made up of immigrants, with many job opportunities going to foreigners rather than locals. This dynamic can create further challenges for native Bahrainis seeking employment in the healthcare sector, potentially limiting their access to stable careers and contributing to poverty.

High debt levels

Bahrain's economy is heavily dependent on oil and gas, with petroleum being the country's most exported product. Despite efforts to diversify, oil still comprises 85% of Bahraini budget revenues. In recent years, lower world energy prices have resulted in significant budget deficits, reaching about 10% of GDP in 2017. Bahrain has limited options to cover these deficits due to its low foreign assets and relatively scarce oil resources compared to other Gulf Cooperation Council (GCC) countries.

The country's high debt levels were highlighted in 2016 when the three major US credit agencies downgraded Bahrain's sovereign debt rating to "junk" status. This downgrade was a result of persistently low oil prices and the government's high debt burden. Despite this setback, Bahrain was able to raise approximately $4 billion by issuing foreign currency-denominated debt in 2017.

To address the fiscal challenges, the Bahraini government has lifted subsidies on various goods, including meat, diesel, kerosene, and gasoline. They have also started to implement higher prices for electricity and water. These measures are part of the country's diversification plans, which include a Free Trade Agreement (FTA) with the US and the planned introduction of a Value-Added Tax (VAT).

The success of these initiatives is crucial for reducing Bahrain's debt levels and improving its economic stability. While Bahrain has a relatively small population of citizens living below the poverty line, addressing the high debt and budget deficits is essential for maintaining the country's social and economic development.

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