(Bloomberg) — Bahrain said it will receive about $2.3 billion this year from a five-year support package provided by its Gulf Arab allies as the island-kingdom seeks to reduce its budget deficit and debt.
The sum is roughly in line with the amount received in 2018, according to Bahrain’s Finance Ministry. The $10 billion package was made available by Saudi Arabia, the United Arab Emirates and Kuwait in 2018 to help avert a currency devaluation that could have reverberated across the region.
The ministry’s announcement is the first that offers details about the aid package, which has helped slash Bahrain’s borrowing costs and restore investor confidence. After struggling to tap international debt markets at some point last year, the kingdom is now planning to sell bonds in the second half of 2019, according to people with knowledge of the matter.
Other details from the Finance Ministry’s statement include:
- Bahrain will receive $1.761 billion in 2020, $1.846 billion in 2021, $1.421 billion in 2022, and $650 million in 2023
- Under its fiscal balance program, the government forecast a budget deficit of 3.4% of gross domestic product this year, compared with 6.4% in 2018
- It sees the shortfall narrowing to 2.1% in 2020
The three wealthier Gulf monarchies rallied to Bahrain’s aid after its finances came under pressure due to lower oil prices. The Saudis have been Bahrain’s key backer since the Arab Spring protests of 2011.
Bahrain’s announcement comes shortly after parliament passed the country’s budget, in which the “government reconfirmed its commitment to subsidy reform,” the ministry said. The kingdom has also introduced value-added taxation and a voluntary retirement program to government employees below director level.
“The deficit is down over a third and annual GDP growth remains robust,” Finance Minister Salman bin Khalifa Al Khalifa said. “Bahrain is demonstrating its commitment to delivering strong, sustainable economic growth.”
The deficit forecasts, however, are lower than International Monetary Fund estimates, which include extra-budgetary spending. The IMF has predicted a shortfall of 8.4% this year and 7.7% next year.
