Bahrain Economic Recovery Plan


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Pillar 4: Achieving fiscal sustainability and economic stability 

Bahrain has commenced the rollout of a five-pillar national economic growth and fiscal balance plan (the Plan).  The Plan is in line with Bahrain's Economic Vision 2030 and aims to support the country's post-Covid recovery and economic diversification, as well as to enhance the Kingdom's long-term international competitiveness. We have explored the goals and initiatives in respect of pillars 1 – 3 already in this series and this article sets out how the Government of Bahrain proposes to achieve fiscal sustainability and economic stability, the fourth pillar.

The Plan set out eight programmes for achieving the fourth pillar:

  1. reduction of recurrent non-manpower expenditure;
  2. reducing project spend;
  3. reducing manpower expenditure;
  4. streamline the distribution of cash subsidies to citizens;
  5. increase contributions of government owned entities;
  6. adjust commodities prices and prices of services provided to companies;
  7. introduce new government services revenue initiatives; and
  8. increase VAT to 10% through legislative procedures.

There has been steady progress towards meeting these programmes, the most immediate being the increase in the rate of VAT from 5% to 10% coming into effect on 1 January 2022.

As part of the Logistics Services Strategy 2022 – 2026 sets out a number of initiatives to push toward the above programmes particularly in respect of reducing expenditure of government entities, including strengthening partnerships between Customs Affairs and various regulatory authorities, integrating the exchange of data amongst customs systems and blockchain technology to manage various government procedures.

As part of the Financial Services Sector Development Strategy 2022 – 2026 the initiatives to assist in achieving the above programmes shall be the development of a system for direct trading in government securities on the secondary market, issuance of a digital Dinar, automation of services to investors provided by Bahrain Bourse and Bahrain Clear, promotion of financial stability, enhancing the infrastructure and network of the BENEFIT Company, integration of retail banks within AFAQ and Buna payment systems, adoption of supervisory technology, automation of workflows and information exchanges between CBB and licensed financial institutions, launch of a new reference benchmark for the Bahrain interbank BD lending, development of interface for instant execution of court orders, creation of cyber-emergency response team and the integration of the eKYC and Credit Reference Bureau with digital channels of institutions licensed by CBB. These initiatives will reduce expenditure of the CBB and other financial authorities, streamline the distribution of cash to citizens and introduce new government revenue streams.

The Telecommunications, IT and Digital Economy Sector Strategy 2022 – 2026 sets out proposals to reduce expenditure, project spend, streamline of cash distributions and new government services initiatives by establishing new digital infrastructure, digitising government documents and moving to ePayments, strengthening partnerships with the private sector to develop government services performance, increasing the efficiency of government services through e-transformation and expanding the use of AI in innovation in government services. The government intends to complement these initiatives by increasing the broadband coverage within the Kingdom, and by increasing the employment in the IT sector, as well as pushing for the automation of additional government services.

The Industrial Sector Strategy 2022 – 2026 proposes that by updating the sector's legislation and regulations as well as investing in infrastructure, including the execution of a memorandum in respect of a new USA Trade Zone, this will in turn lead to additional foreign direct investment in the sector and improve supply chains across the region. 

The Plan is already bearing fruit with the World Bank having revised its forecast for Bahrain's GDP for 2022 from 3.2% to 3.5% (compared to a global downward revision), in part due to the implementation of the Plan, and the government of Bahrain has announced that it has already completed 16 programmes of the scheduled 27 programmes.

The Plan is an exciting step towards the nation's post-Covid recovery with the aim of solidifying Bahrain's place as a leading economy. To quote His Excellency Shaikh Salman bin Khalifa Al Khalifa, Bahrain’s Minister of Finance and National Economy, “This comprehensive economic and fiscal plan is an investment in our nation’s people, our businesses, and the future of Bahrain”.

Read more - Pillar 1: Developing strategic priority sectors, Pillar 2: Launching major strategic projects, & Pillar 3: Simplifying Commercial Procedures

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