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Dubai: Bahrain and Qatar should rein in state spending as part of plans to curb inflation, which is hovering near record levels in the Gulf region, officials said on Sunday.
"In totality, we want to see lower government spending," Bahrain's central bank governor Rasheed Al Maraj told Reuters in reference to the 2009-2010 Bahrain budget.
He made the comments in an interview ahead of a World Economic Forum (WEF) conference in the Egyptian resort of Sharm Al Shaikh.
Like most other Gulf states, Bahrain's dollar peg forces it to track the US monetary policy at a time when the Federal Reserve is cutting interest rates to help the US economy ward off recession.
The Fed has slashed rates by 275 basis points in six moves since September 18.
Bahrain inflation hit 5.24 per cent in March on food prices and rents.
"We'd like to maintain the growth [real GDP] level between 6.5 and 7 per cent," Bahraini Finance Minister Ahmad Al Khalifa said. "The challenge is to keep growth ahead of inflation."
Citing the Qatari Emir's economic adviser Ebrahim Al Ebrahim, London-based MEED magazine said in its latest issue his country was carrying out a review of government spending.
"We are restructuring our government to make sure there is no inefficiency or weakness," Ebrahim said. "The main thing is to convince [the government] you cannot do everything. If you do everything, it will be transferred into inefficiency and then, ultimately, inflation. We have to define priorities," he said.
Plagued by price rises, Gulf governments have boosted subsidies, introduced rent controls, raised state employee salaries, increased welfare payments and slashed import duties to offset the impact of inflation.
"[Cutting government spending] is the most important policy tool available to them [Gulf countries] at the moment," Hany Genena, senior econ-omist at Bahrain-based Gulf Finance House said.
Qatar is trying to cap inflation at its current level of 13.7 per cent.
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