Bahrain hopeful of balancing budget sooner than planned amid high oil prices

Boosting non-oil economy remains priority but $100-plus prices will aid pandemic recovery, finance minister says

A Gulf Air plane flies over the packed Formula One circuit, moments before the first race of the season begins on Sunday, at the Bahrain International Circuit. Reuters

High oil prices may help Bahrain in achieving a balanced fiscal budget sooner than expected, its finance minister said, easing pressure on the kingdom only months after it set out its $30 billion post-pandemic recovery plan.

Sheikh Salman bin Khalifa Al Khalifa, Minister of Finance and National Economy, said prices — currently above $100 per barrel — were a welcome boon.

But he stressed that the kingdom's post-pandemic recovery plan, and its short and medium growth strategy, were focused on growing and diversifying its non-oil economy.

"We are focused on reducing the deficit and stabilising debt levels," he told The National and other media on the sidelines of the Bahrain Grand Prix on Sunday.

"I'm optimistic about hitting the fiscal balance plan ahead of schedule. Higher oil is one part of that.

"The other reason is we are seeing economic growth coming back strongly. Non-oil revenue is an increasing part of our revenue mix, so fact the growth is coming back strongly makes me optimistic."

The island nation's current budget was based on oil prices at $60 per barrel, he said.

Sheikh Salman said raising debt and borrowing on the international markets was likely this year even as Bahrain adheres to a strict fiscal plan that would see the kingdom balance its books for the first time since 2008 by 2024.

"We're a consistent and disciplined borrower," he said.

"We will borrow when the time is right. We've been very disciplined about approaching the market twice a year and we will continue to maintain discipline around our borrowing.

"We're always looking at where rates are and will be opportunistic about going to the market at the right price."

The Gulf’s smallest economy has sought ways to cut spending and achieve a balanced budget by 2024. The country said in 2018 that it planned achieve a balanced budget by 2022 but its progress was derailed by Covid-19 headwinds.

In 2018, Bahrain received a $10bn package from Gulf neighbours to support its Fiscal Balance Programme.

The island nation has adopted various reforms over the past year to manage its finances. It doubled its value-added tax (VAT) to 10 per cent in January, the highest rate in the Gulf after Saudi Arabia, in an effort to boost revenue.

Bahrain's $30bn recovery plan, set out in October 2021, is based around five pillars, with a significant focus on attracting financial services and tech jobs.

Boosting the island's heavy industrial economy is another factor, while infrastructure projects such as the planned metro are expected to create jobs and improve logistics.

The government has set a target to create 20,000 new jobs for Bahrainis in 2022 and a further 20,000 in 2023.