Bahrain plans to focus on “stringent cost controls” in a bid to slash its budget deficit and cut interest costs, while using investment to drive economic growth, the country’s minister of finance and national economy has said.
The Gulf nation’s government lowered its deficit by as much as 35% in 2018 in an effort to balance the budget by 2022, Bloomberg reported citing Sheikh Salman bin Khalifa Al-Khalifa as saying.
A $10 billion support package pledged by GCC nations, including the UAE and Saudi Arabia, requires Bahrain to trim its budget deficit.
“It is very important to ensure we maintain spend where that spend drives economic growth, creates jobs or provides essential services or subsidies,” the minister told the news agency.
In 2014, a plunge in oil prices led Bahrain, and other GCC members, to resort to bond markets in order to finance its budget and replenish its international reserves.
The Gulf aid package will help the smallest GCC economy to borrow from international debt markets at lower rates and avoid a currency devaluation in order to cover half the government’s financing requirements.
Bahrain’s fiscal reform programme included measures to save around BHD 800 million ($2.1 billion) per year including implementing a GCC-approved value added tax (VAT) starting 2019.