Abu Dhabi, UAEWednesday 19 June 2019

Bahrain to tap global capital markets to help fund fiscal reforms, finance minister says

Sheikh Salman bin Khalifa Al Khalifa vows to cut spending and grow revenues in 2019

“We will be opportunistic when we tap the markets, with a wide remit, and see when that period will be,” said Bahrain's Minister of Finance and National Economy, Sheikh Salman bin Khalifa Al Khalifa. Phil Weymouth for The National
“We will be opportunistic when we tap the markets, with a wide remit, and see when that period will be,” said Bahrain's Minister of Finance and National Economy, Sheikh Salman bin Khalifa Al Khalifa. Phil Weymouth for The National

Bahrain’s government plans to tap the global capital markets to fund a five-year fiscal reform plan after winning a $10 billion (Dh36.73bn) aid pledge from countries in the Arabian Gulf that will help rebalance the country’s budget and reduce debt, its finance minister said.

“We have a clear medium-term fiscal plan, we have received funding support from our GCC neighbours and it will provide a major part of the funding requirements for the fiscal plan, and we’ll be going to the international markets for the rest of that financing,” Sheikh Salman bin Khalifa Al Khalifa told a conference in Bahrain on Wednesday.

“We will be opportunistic when we tap the markets, with a wide remit, and see when that period will be [in due course].” He did not supply further details.

Bahrain, the smallest of the GCC economies, has received the first tranche of the $10bn aid package from the UAE, Saudi Arabia and Kuwait agreed last October to eliminate its fiscal deficit by 2022.

In October, the country launched a "fiscal balance" plan to pay down national debt, raise state revenues and develop the private sector over the years to the end of 2022.

The Gulf state is the most debt-ridden in the region, with a debt-to-gross domestic product ratio of 85 per cent and a budget deficit of around $3.5bn in 2017.

Sheikh Salman, who took up the post in December, also pledged to slash government expenditure and raise the country’s revenues in 2019.

“Over the course of the next year, we plan to develop the steps that have been taken, through our credible, robust medium-term fiscal balance plan and the draft budget for 2019 and 2020, which will go to parliament shortly,” he said.

“There are areas where we will look to reduce spending – especially operational expenditures by government – and areas where we will continue to preserve spending, for example, where it would create jobs, drive economic growth and preserves essential services and subsidies for citizens.”

The fiscal plan outlines six key initiatives, including reducing government operational and administrative expenditure, raising revenues through subsidy reductions and the 5 per cent VAT that came into force on January 1. It also includes other measures to boost small and medium-sized enterprises and incentivise private sector expansion.

This week, Bahrain’s cabinet approved a 35 per cent reduction in the budget deficit to 708 million dinars (Dh6.9bn) in 2019 and 613m dinars in 2020. Operational expenditure is reduced by 17 per cent year-on-year.

Bahrain’s GDP growth is forecast to have reached 2 per cent in 2018 and projected to grow marginally to 2.5 per cent in 2019, according to figures from Bahrain Economic Development Board, the country’s investment agency. Growth will be driven mainly by the non-oil sector, which grew by 4.2 per cent in 2018.

“It’s important that we continue the work that has started including the deficit reduction measures, to ensure we have a stable environment where the positive economic growth Bahrain has experienced, can continue,” the minister said.

The government will continue to monitor the inflationary and other impacts of VAT in the year ahead, he added.

Updated: February 27, 2019 04:41 PM

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