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Bahrain’s budget deficit expected to reach $3.2 billion in 2021

Bahrain's budget deficit

The Ministry of Finance and National Economy expected Bahrain’s budget deficit to reach 1.2 billion dinars ($3.2 billion) in 2021.

The ministry said, “government expenditure is expected to total BHD 3,614Mn in 2021 and BHD 3,569Mn in 2022, meaning the overall deficit is expected to be BHD 1,208Mn in 2021 reducing to BHD 1,112Mn in 2022”.

Salman bin Khalifa Al Khalifa, Bahrain’s Finance Minister, affirmed his country’s “continued commitment to the Fiscal Balance Program”. These measures constitute a set of fiscal reforms linked to financial aid which may reduce Bahrain’s budget deficit.

Contracting economy

The International Monetary Fund (IMF) estimated that the Bahraini economy to contract during 2020 by 5.4%. IMF expected damage in some vital sectors due to the Coronavirus pandemic, including the energy and tourism sectors.

During 2018, Bahrain received a relief financial aid program of $10 billion, from allied Gulf states to avoid a crisis. The Kingdom had accumulated large debts, following the oil price crisis in the two years in 2014 and  2015.

Bahrain expects economy to grow by 5% during the current year. The country said the sovereign wealth fund will double its contributions to government revenues. The Kingdom’s intends to boost non-oil revenues.

According to the IMF, public debt in 2020 reached 133% of GDP, up from 102% in 2019.

The overall budget deficit increased in 2020, by 18.2%, compared to 9% in 2019. This is due to lower oil prices and the economic downturn.

“Once the recovery firms, ambitious and growth-friendly fiscal adjustment set within a credible medium-term framework is needed to address Bahrain’s large imbalances, put government debt on a firm downward path, and restore macroeconomic sustainability,” the IMF said in a statement.

“The adjustment would also help rebuild external buffers, solidify the exchange rate peg, which continues to serve Bahrain well as a monetary policy anchor, and support access to sustainable external financing.”

IMF had expected the Bahraini economy to grow during 2021 by about 3.3%. The Fund called for reducing public debt to facilitate the recovery of the economy.

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