Bahrain has signed a $10bn financial aid agreement with Saudi Arabia, the UAE and Kuwait.
The agreement will support Bahrain’s fiscal balance programme, which aims to eliminate the country’s budget deficit by 2022 by delivering annual fiscal savings of BD800m ($2.1bn). The pledge was signed in coordination with the Arab Monetary Fund, which acted as an advisory body.
Manama says fiscal consolidation efforts in 2015-17 yielded annual savings of BD854m.
According to London-based Capital Economics, while the financial support package will help prevent a currency devaluation, the step up in fiscal consolidation efforts will lead to weaker-than-expected GDP growth over the coming years.
The fiscal balance programme has six key themes:
- Public expenditure reductions
- A voluntary retirement scheme for government employees
- Balancing the Electricity & Water Authority's expenditures and revenues so it becomes self-sufficient by 2022
- Streamlining the distribution of cash subsidies
- Improving the efficiency of government spending
- Increasing non-oil revenues and diversifying government income streams
Manama will also establish new units, including a debt management office, and audit and procurement divisions within the Ministry of Finance.
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