IMF says Bahrain needs ‘urgent fiscal adjustment’ after virus

Bahrain has to do more to get its finances in shape, even if it manages to round up additional regional support, according to the International Monetary Fund.

Once it recovers from the economic downturn instigated by the coronavirus pandemic, the island nation will likely need “an urgent fiscal adjustment,” Ali Al-Eyd, the fund’s Bahrain mission chief, said in an interview with Bloomberg.

“Whether that counts with Gulf Cooperation Council support – which might help facilitate that adjustment – or not, that’s still the bottom line,” he said.

Even before the pandemic struck, the smallest Gulf nation was in financial distress, forced to shore up its finances with a $10bn bailout package from wealthier neighbours in 2018.

Bahrain’s budget deficit is expected to shrink by half this year after plummeting oil prices and the virus sent it widening to a record 18 per cent of economic output in 2020, according to IMF estimates. Going forward, though, it’s expected to start growing again until at least 2026.

The fund projects Bahrain’s economy will grow 3.3 per cent this year, but that March estimate could be revised to account for the rebound in oil prices, Al-Eyd said.