Saudi Arabia, Kuwait and the United Arab Emirates reiterated their support for Bahrain’s plans to balance its budget, a move expected to help their neighbor in the debt capital markets.
The three Gulf allies extended a $10 billion aid package to Bahrain in 2018 to help it avoid a credit crunch.
Last month, Bahrain said that due to the coronavirus crisis last year, it had postponed the target year for a balanced budget to 2024 and announced plans to hike a value-added tax to boost state coffers.
The fiscal balance program - a set of reforms aimed at balancing the budget - was linked to the pledged $10 billion.
The ministers of finance of Saudi Arabia, Kuwait, and the UAE met with Bahrain's finance minister on Oct. 19 to discuss the kingdom’s progress in improving its finances.
“The ministers welcomed the efforts made by the government of Bahrain in implementing the Fiscal Balance Program, and the progress made by the government despite the challenges posed by the COVID-19 pandemic,” the three countries said in a joint statement, Reuters reported.
Bahrain’s delaying of its fiscal balance program, which pushed back the zero-deficit target by two years, was seen as unlikely to deter investors from buying its debt due to expectations of continued support from richer Gulf allies, bankers and analysts have previously told Reuters.
Bahrain’s public debt climbed to 133 percent of gross domestic product (GDP) last year from 102 percent in 2019, according to the International Monetary Fund.
S&P forecasts Bahrain’s budget deficit, which was 16.8 percent of GDP last year, to average five percent between 2021 and 2024, excluding the impact of a possible hike in value-added tax.
