a move expected to help the
Bahraini economy ,
which suffered during the
last period, extended Saudi Arabia, Kuwait and the
UAE aid package provided to Bahrain in 2018 worth $ 10 billion to avoid a
credit collapse in the
Bahrain, which announced last month the postponement of the target date for achieving fiscal balance to 2024 - due to the crisis of the Corona virus pandemic last year - announced plans to increase the value-added tax to boost state revenues after the country's public debt exceeded 133% of the volume of GDP.
A joint statement - by Saudi Arabia, Kuwait and the UAE - said that the three countries confirmed their support for the efforts of the financial balance program in Bahrain, in a step that is expected to help Manama enter the bond markets despite the disruption of plans to reform its financial conditions.
Bahrain has faced difficult economic conditions since its oil exports began to decline to about 100,000 barrels per day, providing revenues of about $6 billion annually only, which prompted it to implement an economic reform program aimed at providing the country's financial balance, which has so far failed to Reaching positive results.
Bahrain has faced difficult economic conditions for years (Getty Images)
Data from the Bahrain Information and e-Government Authority show the real suffering experienced by the Bahraini economy, with the country’s gross domestic product shrinking by 2.11%, during the first quarter of 2021 on an annual basis, under pressure from the continuing repercussions of the Corona pandemic and the decline of the non-oil economy.
The authority’s data add that the Kingdom’s gross domestic product shrank to 3.06 billion dinars ($8.16 billion), from 3.13 billion dinars ($8.35 billion) in the corresponding quarter of 2020, in addition to a contraction of the non-oil economy by 2.97% during the same period on an annual basis, While the oil economy rose by 2.04%.
On a quarterly basis, Bahrain's economy contracted by 0.10% compared to the last quarter of 2020, amid a contraction of the non-oil economy by 0.62%, and the growth of the oil economy by 2.36%.
The Central Council of the Federation of Trade Unions refuses to increase the value-added tax https://t.co/wt3HeIGm6f pic.twitter.com/snXDMxX3L3
— 🇧🇭 Hani Al-Fardan (@manamavoice1) October 16, 2021
In the face of Bahrain's budget deficit, the authorities are heading to double the value-added tax to 10%, in an effort to increase state revenues and reduce its budget deficit, according to parliamentary and government sources who spoke to Reuters last September.
According to the sources, discussions are underway between the government and parliament to amend the law, which stipulates that the value-added tax - applied since 2019 - is 5%, as part of plans to reform the country's financial situation and increase non-oil revenues.
Despite the noticeable increase in oil prices during the last period, the Bahraini economy is still suffering as the weakest link among the economies of the Gulf countries, due to the lack of natural resources owned by this country, and the increase in the budget deficit, which makes it need support from the Gulf Cooperation Council countries, as well as the fact that Bahrain is the least productive Arab Gulf country in oil resources.
After oil and gas contributed about 85% of Bahrain’s budget revenues in previous years, this contribution decreased by 22% in the 2021 budget and 23% in the 2022 budget, constituting 63% and 62% of the total budget revenues in the two years, respectively.
Standard & Poor's expects Bahrain's public budget deficit to average 5% from 2021 to 2024, compared to 16.8% of GDP last year, excluding the impact of a potential value-added tax increase.
Last August, the Bahraini Ministry of Finance announced that the government's budget deficit amounted to 520 million dinars ($1.38 billion) in the first half of 2021, down 35% compared to the same period the previous year.Keywords: bahrain, economy, move, saudi arabia, kuwait, aid package, manama, credit collapse, tax, uae, countries, step, budget deficit, balance, postponement