Bahrain’s government has presented parliament with details of a new fiscal strategy aimed at addressing the nation’s substantial public debt and reducing its historical dependence on oil revenues, according to government officials and parliamentary sources.
Ahmed Al Salloom, chairman of parliament’s financial and economic affairs committee, outlined the plan’s key components in a recent interview. The strategy focuses on expanding non-oil sectors, including tourism, financial services, manufacturing, and technology, though specific targets and implementation timelines were not disclosed.
The Gulf nation faces significant economic challenges, including a high debt-to-GDP ratio that has been further strained by fluctuating oil prices and the economic impact of the Covid-19 pandemic. The government has set an ambitious target to reduce its debt-to-GDP ratio to 60 percent by 2036, though economists note this goal will require substantial structural reforms.
One notable element of the plan is the introduction of corporate taxation beginning January 2025. Officials project the new tax will generate approximately BD100 million (approximately $265 million) in revenue, affecting roughly 300 companies, only seven of which are fully Bahraini-owned. This represents a significant shift in tax policy for the Gulf state, which has historically relied primarily on oil revenues.
The government plans to calculate its upcoming 2025-2026 budget based on a conservative oil price estimate of $60 per barrel. Parliamentary leaders are also pushing for increased contributions from the country’s sovereign wealth fund, Mumtalakat, and the state-owned oil company, Bapco Energies, though the extent of these contributions remains under discussion.
Some lawmakers are advocating for independent government agencies to channel their surplus funds into the national budget, similar to how municipal revenues are currently handled. However, the specific mechanisms for these transfers and their potential impact on agency operations have not been fully detailed.
The success of Bahrain’s fiscal reforms will largely depend on the government’s ability to implement structural changes while maintaining political stability and public support. The country’s Economic Recovery Plan has shown some initial progress in improving public sector efficiency, though significant challenges remain in diversifying the economy and attracting foreign investment.
Government officials and parliamentary representatives are scheduled to meet this week to discuss further financial measures, as the nation attempts to navigate its economic transformation while maintaining its currency stability and financial sector growth.
