Thursday 11, October 2018 by Kudakwashe

Gulf funds to support fiscal adjustment in Bahrain, says Fitch

 

The package agreed with Bahrain's Gulf allies last week will take the form of a long-term interest-free loan. 

Fitch Ratings has said that Bahrain's $ 10 billion support package will help restore external market access while the Government works to stabilise its public finances.

In a statement, Fitch stated that the accompanying fiscal programme is the Kingdom’s clearest medium-term plan in recent years, but achieving the Government's fiscal targets will be tough.

Bahrain’s new fiscal projections suggest that this will be disbursed gradually until 2022. 

According to Fitch’s forecast, Bahrain will need the equivalent of around $3 billion of new financing every year between 2018 and 2020 just to cover the budget deficit, with banks in a position to provide some of that. Also, the Kingdom will require $7 billion to $ 8.5 billion per year to roll over existing debt, but most of this is domestic short-term instruments held by local banks. 

The Kingdom’s Fiscal Balance programme (FBP) published last week, aims to eliminate the fiscal deficit by 2022, to put Government debt on a downward trajectory and intends to have all measures approved by end-2018.

The Government will also pursue further fee increases and has reiterated its commitment to implement value-added tax (VAT).

The FBP targets to gradually return budgetary spending to around 20 per cent of GDP, from around 27 per cent last year and also to double non-oil revenue as a share of budgetary expenditure.

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