The IMF issued a report on 26 April 2016 following consultations with Bahrain under Article IV of its articles of agreement.
Bahrain has been affected by the decline in oil prices and the fiscal deficit is projected to remain high over the medium term. Economic growth slowed to around 3.2% in 2015 from 4.5% in 2014. The Bahrain government has implemented fiscal adjustment measures including reforms of energy prices and increases in taxes on tobacco and alcohol. The IMF considers that the country’s growth prospects would be improved by continued reforms to diversify the economy.
Recommended actions to reduce debt over the medium term include measures to contain current expenditure and efforts to raise non-oil revenue, including the adoption of a value added tax (VAT). Energy subsidies should be reduced and replaced by targeted transfers. Public awareness and support for the measures could be improved by strong communication.
The IMF considers that obstacles to private investment should be removed to encourage diversified and sustainable growth. Recently initiatives have been taken to improve the business climate. The IMF considers that additional measures should be taken to reduce the cost of doing business and to allow national workers to acquire the skills for private sector employment.
