Was Ministers Meeting to Help Bahrain Access Debt Markets Only?
2021-10-25 - 12:53 am
Bahrain Mirror (Exclusive): A meeting of finance ministers from Saudi Arabia, the UAE, Kuwait and Bahrain, as well as the Arab Monetary Fund was convened to discuss the financial balance program, however, it didn't give out any concrete results.
The three countries reiterated their support for Bahrain's plans to restore the lost balance of its general budget, but the statement issued after Tuesday's meeting (October 19, 2021) did not reveal the resumption of aid disbursement as planned by the program.
The three states had been unable to meet their program obligations because of the economic and financial impacts of the Coronavirus pandemic.
Under the program, the three countries were scheduled to disburse a $1.76 billion aid payment (September 2020), but the three countries informed Bahrain that they will postpone the payment.
It is believed that the statement will help Bahrain access the financial markets to be able to borrow more despite the stalled program and inflated public debt, but this does not solve its intractable financial problem.
Bahrain's public debt rose to 133% of GDP last year from 102% in 2019, according to the International Monetary Fund.
Public debt interest is the most common item in the country's budget, with more than one third of the budget going to pay interest on public debt. The government has allocated some 700 million dinars this year for this, and its allocation is expected to reach 740 million dinars next year.
The government stated last month that due to last year's Coronavirus crisis, it postponed the target year for a balanced budget to 2024 and announced plans to increase VAT to boost state treasury.
Standard & Poor's expects Bahrain's budget deficit, which was 16.8% of GDP last year, to reach an average of 5% between 2021 and 2024, excluding the impact of a potential VAT increase.
Analysts do not expect Bahrain to reach a balanced budget without diversifying and increasing sources of income, stopping corruption and without the ruling family abandoning its privileges.
Helping Bahrain borrow more money is not enough to address the underlying crisis of debt reaching record levels, accumulating further public financial burdens on an annual basis.
Bahrain needs a new vision based on its local potentials, not relying on neighboring countries, especially since the agreement signed in 2018 was not fulfilled.