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Institutions and Macroeconomic Policies in Resource-Rich Arab Economies$
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Kamiar Mohaddes, Jeffrey B. Nugent, and Hoda Selim

Print publication date: 2019

Print ISBN-13: 9780198822226

Published to Oxford Scholarship Online: July 2019

DOI: 10.1093/oso/9780198822226.001.0001

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Fiscal Outcomes in Bahrain

Fiscal Outcomes in Bahrain

Oil Price Volatility, Fiscal Institutions, or Politics?

(p.329) 11 Fiscal Outcomes in Bahrain
Institutions and Macroeconomic Policies in Resource-Rich Arab Economies

Hoda El Enbaby

Hoda Selim

Oxford University Press

This chapter argues that political economy factors, rather than oil wealth, shape the budgetary process and outcomes in Bahrain. Fiscal volatility and excessive current spending (in the form of wages, social welfare, and subsidies) leading to unsustainable non-oil deficits are not fully derived from oil price volatility. Weak institutions, including those underlying the budgetary process, have contributed to some fiscal laxity. These have allowed rulers to use current spending as a channel for the redistribution of oil rents and to secure political stability and allegiance to the regime in a turbulent sociopolitical environment. The budgetary process has been undermined by the structure of the bicameral parliament, while the absence of restrictions on parliament to amend the budget weakens the position of the executive. In the general context of limited transparency and accountability, the government may also be exercising its discretionary powers over the budget execution but this cannot be known.

Keywords:   Bahrain, political economy, budgetary process, institutions, oil rents, oil deficits

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