Weak Oil Prices Challenge Bahrain Budget
Weak Oil Prices Challenge Bahrain Budget

Weak Oil Prices Challenge Bahrain Budget

Weak Oil Prices Challenge Bahrain Budget

Bahrain’s budget for fiscal years 2017 and 2018 serves as testimony of the complex challenges confronting the country’s public finances. The budget is beset by a host of problems, including an alarming deficit on the one hand and the possible introduction of value-added tax on the other.
To its credit, Bahrain stands out among six Persian Gulf Arab countries (including United Arab Emirates, Saudi Arabia, Oman, Qatar and Kuwait) by publishing budgets for two fiscal years consecutively. The practice is designed to provide private sector investors the opportunity to gauge governmental expenditures for two successive years, Arabian Business reported.
Stats for fiscal year 2017 suggest expenditures of $9.2 billion and revenues of $5.8 billion, for a projected deficit of $3.4 billion and one less than 11% of GDP. Yet, that for fiscal year 2018 suggest expenditures of $9.2 billion and revenues of $6.2 billion, and a deficit of $3 billion. The higher projected revenues partly reflect implementation of VAT.
The projected deficits compare favorably with the actual one for 2016, which recorded $4 billion and 12.5% of GDP. Anyway, the size of the deficit for fiscal years 2016 through 2018 violates a key criteria of the (Persian) Gulf Monetary Union scheme. The GMU restricts budgetary shortage to 3% of GDP.
Adding to the concerns, a recent report by Bank of America Merrill Lynch has classified Bahrain as having the largest fiscal deficit among 68 economies deemed most vulnerable to weak oil prices. And then there is the challenge of the ever increasing public debt, with the latest at a record $24 billion. This is sizeable amount by virtue of accounting for 76% of GDP.

Bahrain’s 2017 deficit is projected at $3.4 billion.


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