NAO Report Says Bahrain Debt Higher Than BD19.3bn Headline Figure

Hidden borrowing has pushed Bahrain’s real public debt above the official BD19.3 billion figure, the National Audit Office warns in a new 600-page report that tracks billions in loans taken directly by ministries and state bodies.

According to the report, gross public debt rose by eight per cent from BD17.9bn at the end of 2023 to BD19.3bn a year later. Interest costs climbed from BD843m in 2023 to BD945m in 2024. On top of the recorded debt, ministries and other public bodies borrowed directly from external funds and banks, taking the total to an estimated BD4.9bn in 2024, up from BD3.9bn a year earlier, without those loans appearing in the Finance and National Economy Ministry’s debt register.

The Finance Ministry said it partly agreed with the observation. It linked its debt-management work to wider plans to narrow the budget gap and said smaller deficits would reduce the need to borrow, subject to market conditions and liquidity. It added that it works with the Central Bank of Bahrain to secure lower-cost funding. On direct borrowing by public bodies, the ministry cited Article 108(b) of the Constitution, which allows municipalities and public institutions to borrow under their own laws, and said such loans are not classified as government debt as they are not guaranteed by the state.

The deficit between income and spending widened. The Audit Office reported that the shortfall rose from BD774m in 2023 to BD1.026bn in 2024, an increase of 33 per cent. The ministry attributed this mainly to an 11 per cent fall in oil income, a 13 per cent increase in interest payments and a five per cent rise in project spending.

Total state revenues dropped from BD3,196m in 2023 to BD3,026m in 2024, a fall of five per cent. Oil income slipped from BD2,035m to BD1,820m. The report also noted that Bapco Energies had yet to transfer BD66.4m in 2024 returns to the Treasury, as required under the 2023–2024 budget law. The ministry said it shared the aim of collecting all dues and was following up with the company.

The Future Generations Reserve Account showed stronger gains. Its assets increased from USD769m at the end of 2023 to USD924m at the end of 2024, a rise of 20 per cent. Liabilities went up from USD3.52m to USD6.25m, while net profit increased from USD64m to USD72m.Spending on projects rose from BD277m in 2023 to BD291m in 2024. The Finance Ministry said higher allocations, especially for infrastructure, had helped support economic activity.

Beyond the state finances, the report examined controls across several fields. In construction, it found that the Municipalities Affairs and Agriculture Ministry, the Capital Municipality and the other three municipalities had in some cases granted site supervision powers to engineers who lacked civil or structural engineering qualifications, contrary to the guidance manual for the ‘Benayat’ electronic building-permit system. It also found instances where permits were marked as fully compliant in Benayat despite breaching requirements, and said Civil Defence and Public Health were not built into the system as prior-approval bodies, allowing some permits to be issued before those services had their say.

Auditors also pointed to weak follow-up. Some audit staff failed to record the outcome of their checks or to notify engineering offices. Around 240 building permits were left unaudited for more than 760 working days, far beyond the ten-day ceiling. Benayat was also found to approve permits automatically after ten working days even where other state bodies had already labelled them non-compliant, which increases the risk that building work goes ahead on the back of flawed permits.

The Municipalities Affairs and Agriculture Ministry said it would restrict site supervision to civil and structural engineers and was already working to correct breaches, with a completion target of the end of 2025. It said it had begun reviewing permits wrongly treated as ‘green’ and would send its findings to the Audit Office by the end of 2025. The ministry added that it would co-ordinate with the Information and eGovernment Authority to place Civil Defence and Public Health in the Benayat prior-approval chain so no permits can be issued without their clearance, with this work expected to finish by the end of 2026. It pledged to enforce the ten-day audit limit, ensure audit results are recorded and shared with engineering offices, amend the system so permits are not approved automatically where other agencies have tagged them ‘yellow’ or ‘red’, and apply penalties under the executive regulations to engineering offices in breach, with the main work due by the end of 2025.

The report also examined business ownership by public servants. It found commercial registrations in the names of public-sector staff, in breach of Article 34 of the Civil Service Law’s executive regulations, which bar public employees from owning a commercial registration. It also found cases in which private-sector workers held registrations without a ‘no-objection’ letter from their employer, contrary to Industry and Commerce Ministry procedures.

The ministry said it accepted the observation and had co-ordinated with the Civil Service Bureau to list all registrations issued to public employees and contact the owners to correct their position. The bureau has been given power to check registration data before new appointments go through. This work is due to finish in the fourth quarter of 2025. For private-sector staff, the ministry said it would review registrations granted without an employer’s ‘no-objection’ letter and contact those owners to obtain the required paperwork, with a target of the second quarter of 2026. It stressed that current and future registrations require such a letter.

On vehicles and fuel use, the Audit Office told the Industry and Commerce Ministry that technical rules were needed to set minimum fuel-economy levels for used vehicles so buyers could compare them. It also noted that the Inspection and Metrology Directorate had not carried out regular inspections of car and tyre dealers between January 2022 and 31 March 2025 to check that energy-efficiency labels were displayed.

The ministry said it would study the scope for technical rules on fuel-economy standards for used cars and checks for importers, and would raise the issue at the GCC committee on vehicle and tyre standards. It cautioned that it is hard to apply such rules without approved testing methods and specialised laboratories, and said the main aim of informing buyers is already met because all new cars carry an efficiency label. Fuel use in used cars, it added, depends on factors such as age, mileage, maintenance, tyres and load. It expects to complete work on the recommendation in the third quarter of 2026. On inspections, the ministry said it had run a campaign in tyre shops in July 2025 and would inspect vehicles in the fourth quarter of this year, with another campaign to follow next year, and aims to meet the recommendation in the fourth quarter of 2026.

Water losses through illegal connections were another concern. The Audit Office reported that the Electricity and Water Authority treated illegal water links as apparent losses from unbilled, unlawful consumption, which strains resources and the network. The authority offers settlements where offenders pay for estimated unlawful use, but sends cases to the competent bodies only if the offender has no account or fails to pay.

The report said the authority did not draw up full reports or complete case files for all breaches, often sending only a text message unless the case reached the courts. It calculated the value of the water taken but did not add the cost of repairing the network, and it questioned the basis for capping the period for which unlawful use is billed at five years.

The authority replied that since mid-2022 it had moved towards settlements with offenders willing to pay and regularise their position. A draft law to amend Article 7 of Decree-Law No. 1 of 1996 has been drawn up to give it power to settle such cases, and those provisions are being folded into a wider bill to restructure the electricity and water sector now before the legislature, along with a proposed new Article 379 bis in the Penal Code. The authority said this route protects customers’ interests, speeds up case handling, eases pressure on the courts and raises satisfaction, while cases that are not settled are still sent to the Public Prosecution.

It suggested that the Audit Office’s recommendation should instead support continued co-ordination to secure the legal change, rather than require that all cases be sent to prosecutors. On case files, the authority said it now draws up an official record in all cases where the offender appears in person or the case goes to the courts, stores records electronically and produces them on request; where there is no response, it still records the case and passes it to its legal adviser. This has been in place since 2023 and is being reviewed this year, with changes due in the fourth quarter of 2025. It will also study adding the cost of remedial works to sums charged to offenders. On the five-year cap, it said the rule followed an Administrative Unit decision that applies where the length of the breach cannot be fixed exactly or is longer than five years. Some ten-year cases, it added, involved combined breaches such as illegal connections and use of water for unauthorised purposes, which are treated as aggravated offences under Article 2 of Decree-Law No. 1 of 1996 and handled differently. The authority said it is reviewing the Administrative Unit decision to strengthen procedures and ensure full recovery of its dues, with completion expected in the fourth quarter of 2025.

The report also reviewed the work of the Audit Office itself. Over the last professional year it carried out 104 audit tasks, issued 84 reports and produced 104 follow-up reports to check the status of earlier recommendations. Around 1,224 recommendations were issued; follow-up work found that audited bodies had implemented, or begun to implement, 84.9 per cent of them, a rise of 0.2 percentage points on the previous year.

Receiving the twenty-second annual report for the 2024–2025 professional year, Speaker Ahmed bin Salman Al Musallam said the Council of Representatives was keen to support and develop financial and administrative oversight to protect public funds and raise performance, and would study the report under constitutional and legal procedures. Audit Office president Shaikh Ahmed bin Mohammed Al Khalifa said the office follows a ‘positive’ approach based on partnership and co-operation with audited bodies and applies international standards and domestic law.

Shura Council chairman Ali bin Saleh Al Saleh also praised the Audit Office’s work, saying it helped maintain the efficiency of government institutions in line with Bahrain’s development path under King Hamad and with the support of Crown Prince and Prime Minister Prince Salman bin Hamad Al Khalifa.