Bahrain launches major reform; zero deficit seen in 2022
COMMERCIAL NEWS
The Government of Bahrain has announced a comprehensive package of reforms that will secure the kingdom’s long-term fiscal stability.
A newly-announced Fiscal Balance Programme - the product of a far-reaching spending review conducted across all government departments - will see the country's budget deficit eliminated by 2022, with the aim of delivering annual fiscal savings of BD800 million, a Bahrain News Agency report said.
To support the funding requirements of the Fiscal Balance Programme, a financial support agreement worth $10 billion was signed between the Government of Bahrain and the governments of Saudi Arabia, the UAE and Kuwait.
This programme builds on previous fiscal consolidation efforts, where initiatives implemented during the period of 2015-2017 yielded annual fiscal savings amounting to BD854 million.
The programme is centred on six pillars designed to align non-oil government revenues with economic growth, said the Ministry of Finance. They include:
• Public expenditure reductions, through six dedicated government task forces;
• A voluntary retirement scheme for government employees, providing participants with early access to end-of-service packages and the opportunity to utilise their skills in the private sector;
• Balancing the Electricity and Water Authority (EWA) expenditures and revenues, ensuring EWA is self-sufficient by 2022, incentivising sustainable consumption within the kingdom while continuing to support Bahrainis in their first household;
• Streamlining the distribution of cash subsidies, consolidating and redirecting cash subsidies towards eligible citizens to ensure fairness and improve quality of life;
• Targeting inefficient operational government expenditures, ensuring spending efficiency and strengthening accountability within government departments;
• Simplifying government processes and increasing non-oil revenues, to drive economic growth, diversify government income streams and align non-oil revenue with positive economic growth.
The measures also include the establishment of a series of new units designed to monitor spending, streamline processes, enhance transparency and increase efficiencies across government. These include the establishment of internal audit and central government procurement units within the Ministry of Finance, and a new debt management office.
Speaking at the announcement Bahrain's Deputy Prime Minister Shaikh Khaled bin Abdulla Al Khalifa, Chairman of the Ministerial Committee for Financial Affairs, said: "Today's announcement demonstrates our commitment to putting the government’s finances on a solid and sustainable footing."
"Our Fiscal Balance Programme, combined with the Financial Support Agreement from Saudi Arabia, the UAE and Kuwait allows for a swift and achievable consolidation programme that balances fiscal sustainability with continued economic growth and prosperity."
Bahrain's Minister of Finance Shaikh Ahmed bin Mohamed Al Khalifa said: "With spending reductions commencing in the short term and the target of eliminating the budget deficit by 2022, the programme secures the foundations of an economy that affords even more opportunity, more jobs, and greater living standards for the Kingdom's generations of today and tomorrow."
