Bahrain’s allies offer aid package, yet the idea’s likely to come with strings attached

No details of the aid package were revealed yet markets responded favorably to the news with the Bahraini dinar recovering via a 17-year low against the dollar Tuesday. Investor appetite for Bahraini government debt also recovered following the announcement with the yield on its international bond maturing in August 2023 plunging to 7.58 percent via 8.95 percent, Reuters reported.

Earlier This kind of week, yields (which rise when investors demand a higher return when investing in what’s perceived to be a riskier asset) had climbed amid fears which Bahrain might not be able to redeem a $750 million Sukuk (Islamic) bond which matures in November.

the idea’s the second of the kind of aid package which Bahrain — the region’s oldest yet smallest oil producer — has received in recent years. Amid Arab uprisings taking place in North Africa as well as the Middle East in 2011, Bahrain as well as Oman received a $20 billion fund to support their economies as well as boost jobs.

There have been prolonged concerns over the kingdom’s financial stability, in particular its budget deficit as well as debt level.

In May, the International Monetary Fund (IMF) said which Bahrain’s output remained “resilient” in 2017, with the economy growing at around 3.8 percent. the idea also stated which the kingdom’s fiscal deficit is usually estimated to have declined to 14 percent of gross domestic product (GDP), via around 18 percent in 2016.

Public debt had increased to 89 percent of GDP, the IMF said, following an assessment of the economy, “while the current account deficit (a measurement of a country’s trade) remained unchanged at 4.5 percent.”

Over the medium term, however, the IMF said which “the deficit is usually projected to remain sizable, using a rising interest bill as public debt continues to enhance. Without further measures, non-oil revenue is usually supposed to stagnate as well as growth to slow.” As such, the idea said “a credibly large fiscal adjustment is usually a priority.”

The implementation of a value-added tax (a sales tax which Bahrain says the idea will introduce later This kind of year) was welcomed by the IMF yet the idea also said which additional revenue measures — including the consideration of a corporate income tax could be welcome. the idea also said consideration should be given to better targeting subsidies as well as addressing the large wage bill.

“Especially given fiscal constraints, sustained structural reforms remain key to supporting growth as well as diversification,” the IMF said in its concluding remarks.

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