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BAHRAIN ANNOUNCES MAJOR NEW ECONOMIC GROWTH AND FISCAL BALANCE PLAN
The government of Bahrain announced a new national economic growth and fiscal balance plan on 31 October, which pushes a zero-deficit target back from 2022 to 2024 and increases the rate of VAT from 5% to 10% The multi-year plan is designed to support the post-COVID 19 recovery and boost the long-term competitiveness of the Bahraini economy.
The five-pillar plan, which aligns with Bahrain’s Economic Vision 2030 and the Kingdom’s intention to achieve net zero carbon by 2060, comprises:
- A new Labour Market Reform Plan that aims to create 20,000 Bahraini jobs and train 10,000 Bahraini annually until 2024. The plan includes a long-term National Labour Market Strategy, a review of labour fees and a new ‘Tamkeen Strategy’ (the public authority that supports the development of the private sector) to continue upskilling the Bahraini workforce.
- A Regulatory Reform Package that aims to support USD2.5 billion of Foreign Direct Investment by 2023. The package includes simplifying business licence approval procedures and implementing a new residency permit programme to attract talent and investors. It will also see the launch of a new government ‘Land Bank’, a new online portal to showcase investment opportunities and a new online portal to digitise and simplify urban planning related services.
- A Strategic Projects Plan that aims to catalyse over USD30 billion of investments in strategic projects and create new industrial investment areas across the Kingdom.
- A new Priority Sectors Plan for oil and gas, tourism, logistics, financial services, manufacturing, telecommunications, IT and digital economy aims to support annual growth of 5% in the non-oil sector by 2022.
- An update to the Fiscal Balance Programme, which seeks to balance Bahrain’s budget by 2024 (two years later than the pre-COVID 19 target of 2022) and will incorporate eight new fiscal reform workstreams:
- Reducing recurrent non-manpower expenditure.
- Reducing project spend.
- Reducing manpower expenditure.
- Streamlining the distribution of cash subsidies to citizens.
- Increasing the annual contributions of government-owned entities.
- Adjusting commodities prices and the prices of services provided to companies.
- Introducing new government services revenue initiatives.
- Increasing the rate of VAT to 10%.
“This comprehensive economic and fiscal plan is an investment in our nation’s people, our businesses, and the future of Bahrain,” said Minister of Finance and National Economy Shaikh Salman bin Khalifa Al Khalifa.
“The swift healthcare and economic action taken by the government throughout COVID 19 secured the foundations of recovery, as evidenced by the real YoY growth of 5.7% in the second quarter of this year. The Kingdom is emerging from the pandemic with reasons to be highly optimistic and the plan announced today aims to turbocharge the recovery.”
“The plan is also a concrete statement of our intent to secure a balanced budget by 2024 and provide long-term fiscal sustainability, with eight new spending and revenue initiatives complementing our broader economic competitiveness enhancements,” he said.
Article supplied by the Sovereign Group