Bahrain’s budget deficit is expected to continue widening in the medium term, and in the absence of additional fiscal measures, government debt is projected to follow suit, the IMF says. Were this to happen, it could prove a key source of vulnerability to the economy in the medium term.
To help stabilize this debt, the IMF recommends a retargeting of subsidies to the lower-income segments of Bahrain’s population, and the curbing of spending growth, particularly on the public sector wage bill, and goods and services. Capital expenditure too should be preserved, the IMF says, in order to limit the impact of fiscal consolidation on growth. The seemingly ever-present issue of state revenue diversification was also touched on by the IMF, which described it as ‘essential’ in the longer term, in order to lower vulnerability to oil price shocks. (CONTINUED - 335 WORDS)