Bahrain, as the weakest economy of the rich Gulf Cooperation Council economies, despite the rise in oil prices, still needs and economic rescue according to Bloomberg.
The Kingdom “needs crude prices above $88 a barrel to balance its budget this year, according to the International Monetary Fund,” the agency said.
The agency indicated that Bahrain is preparing to benefit from the rise in oil revenues in the coming months to finance the budget deficit, which widened following the outbreak of the Coronavirus pandemic.
“About $5.6 billion of the GCC Development Fund program has been utilized to date, with around $500 million of projects awarded in the first three months of 2021,” Bloomberg said.
“Ambitious reform is needed to address Bahrain’s large fiscal imbalances and there doesn’t seem to be the political will behind this currently,” said Scott Livermore, chief Middle East economist for Oxford Economics in Dubai.
“The general consensus seems to be that Bahrain will need further Gulf backing in the medium term.”
Bahrain, a small oil producer, received $10 billion in aid from Saudi Arabia, the United Arab Emirates and Kuwait over five years in 2018.
But Bahrain’s Finance Minister, Sheikh Salman bin Khalifa Al Khalifa, told the agency that his priority at the moment was to restore economic growth rather than increase revenues.
“We really want to see the recovery take hold before we take any additional steps in that regard,” he said.
The International Monetary Fund expects Bahrain’s reserves to average $2.5 billion in 2022, covering only 1.2 months of imports.
Bahrain’s budget deficit is likely to reach about 9% of the economic output this year, more than double Oman’s deficit of 2.4%, according to International Monetary Fund data.
Fitch’s chief analyst for Bahrain had previously suggested that Manama would need more financial assistance from its Gulf neighbors starting in 2023.
In April, Moody’s credit rating agency revised Bahrain’s outlook to negative with a B2 rating.
The new Coronavirus pandemic affected Bahrain as a result of the drop in oil prices, in addition to the economic closure that has continued for intermittent periods since March 2020.