Bahrain latest gulf country to announce drastic spending cuts
Bahrain will slash state spending by nearly a third to help it weather the economic effects of the coronavirus pandemic. Bahrain will slash spending by ministries and government agencies by 30 percent to help the country weather the coronavirus outbreak, according to a cabinet statement released after a meeting on Monday.
The Gulf island state’s government will also reschedule some construction and consulting projects to keep spending within the 2020 budget and make room for other spending needs emerging as a result of the disease’s spread. The move comes as other states in the Gulf including Saudi Arabia and Oman seek to cut spending as they face fiscal pressure from virus containment measures that have brought to a near halt vital economic sectors such as tourism and transport.
The oil price crash and an agreement on production cuts are also expected to weigh on regional budgets this year. The Bahraini government has agreed to “reschedule a number of construction and consulting projects to make room for more emergency spending to help with the spread of the coronavirus within the ceiling of the 2020 national budget,” the statement said on Monday. The cabinet also issued some amendments to the labour code allowing it to rethink allowances and benefits of public sector employees, it added.
Oman has recently reduced its budgeted expenditure by more than $1bn through cuts to development and operating budgets, while Saudi Arabia - the largest Arab economy - last month cut almost 5 percent of its 2020 budget and said it would reassess expenditure according to developments in oil markets and the pandemic. Bahrain, rated junk by all the three major credit rating agencies, last month obtained a loan of around $1bn which it used to repay a maturing bond, sources told Reuters news agency. The government could post a fiscal deficit of 15.7 percent of GDP this year from a 10.6 percent deficit in 2019, according to the International Monetary Fund, while the economy could contract by 3.6 percent. The IMF expects growth to bounce back to 3 percent in 2021.