Bloomberg: Bonds Help Bahrain Avoid Unpopular Decisions Like Freezing Public Sector Employment
2018-03-12 - 3:00 am
Bahrain Mirror: Bloomberg said that access to a debt is helping some cash-strapped nations in the Gulf Cooperation Council kick reforms down the road.
Junk-rated Bahrain and Oman have the weakest finances in the GCC and face making politically unpopular decisions such as freezing public sector employment and cut spending significantly, stressing that they tap bond markets to fund their budget deficits.
Bahrain tapped the international bond markets for $3.6 billion in 2017. It may issue this year to help meet funding needs.
The agency added that Bahrain and Oman have been slow to implement reforms compared with their richer neighbors such as Saudi Arabia and Abu Dhabi, which have slashed expenditure, rolled back some subsidies and introduced value added tax.
Easy access to the bond market "is blunting the urgency for reforms, but they also have to take into account political considerations and the debate around the new social contracts they are trying to implement," said John Sfakianakis, the director of economic research at Gulf Research Center in Riyadh.
He added "The more they delay implementing steps to raise non-oil revenue, the more difficult it will become in an environment of rising interest rates."
Bloomberg stated that Bahrain's fiscal deficit this year is forecast at 11.9% of GDP, and economic growth is set to ease to 1.7% this year, the slowest pace since 1989, according to the IMF.
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