Bahrain said it would receive about $2.3 billion this year from a five-year support package provided by its Gulf Arab allies as the island kingdom seeks to reduce its budget deficit and debt. The sum is roughly in line with the amount received in 2018, according to Bahrain’s Finance Ministry. The $10 billion-package was made available by Saudi Arabia, the United Arab Emirates and Kuwait in 2018 to help avert a currency devaluation that could have reverberated across the region.
The ministry’s announcement is the first that offers details about the aid package, which has helped slash Bahrain’s borrowing costs and restore investor confidence. After struggling to tap international debt markets at some point last year, the kingdom is now planning to sell bonds in the second half of 2019, according to people with knowledge of the matter.
Bahrain will receive $1.761 billion in 2020, $1.846 billion in 2021, $1.421 billion in 2022, and $650 million in 2023, the statement said.
The government Wednesday night forecast a budget deficit of 4.7 percent of gross domestic product this year, compared with 6.2 percent in 2018 while it sees the shortfall narrowing to 3.9 percent in 2020.
The three wealthier Gulf monarchies rallied to Bahrain’s aid after its finances came under pressure due to lower oil prices. Saudi Arabia has been Bahrain’s key backer since the Arab Spring protests of 2011, when it sent troops to help quell protests led by the Shiite population.
Bahrain’s announcement comes shortly after Parliament passed the country’s budget, in which the “government reconfirmed its commitment to subsidy reform,” the ministry said.
The kingdom has also introduced value-added taxation and a voluntary retirement program to government employees below director level.
Bahrain’s Eurobonds due 2028 have rallied this year, pushing the yield down about 1 percentage point to 6 percent Thursday, according to data compiled by Bloomberg.
“The deficit is down over a third and annual GDP growth remains robust,” Finance Minister Salman bin Khalifa Al-Khalifa said.
“Bahrain is demonstrating its commitment to delivering strong, sustainable economic growth.”
The deficit forecasts, however, are lower than International Monetary Fund estimates, which include extrabudgetary spending. The IMF has predicted a shortfall of 8.4 percent this year and 7.7 percent next year.
The Daily Star