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Reuters: IMF Urges Bahrain to Cut Deficits as Oil Prices Fall

2016-01-31 - 1:04 am

Bahrain Mirror (Reuters): The International Monetary Fund on Friday (January 29, 2016) urged Bahrain to take "sizable" steps to reduce its growing budget deficit as slumping oil prices have sharply reduced exports and government revenues.

The warning following the IMF's annual consultation with the island Gulf state.

In Bahrain, the IMF said it forecasts gross domestic product growth to fall to 2.2 percent in 2016 from 3.2 percent in 2015 and 4.5 percent in 2014. The country's budget deficit will remain elevated at 15 percent of GDP, causing debt to increase substantially.

"With the oil price decline expected to persist over the medium term, external and fiscal vulnerabilities have intensified, and consumer and investor sentiment has weakened," the IMF said in its review.

"A sizable fiscal adjustment is urgently needed to restore fiscal sustainability, reduce vulnerabilities, and boost investor and consumer confidence," the Fund added.

IMF further stated that the near-term fiscal measures could include the implementation of a previously agreed value added tax, reducing spending on social transfers and freezing public-sector wages.

Fiscal consolidation will help support Bahrain's dollar peg, the IMF said, adding that Bahraini banks' strong capitalization and liquidity will help them weather a slowdown in growth.

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