The Kingdom of Bahrain has launched a new and comprehensive package of economic measures as part of its ambitious fiscal reform program, complementing the government's agenda to achieve a balance between expenditures and revenues. These decisive steps come at a time when the Kingdom seeks to enhance its fiscal sustainability and reduce its overall dependence on oil revenues, in line with global and regional economic shifts.
Details of the new procedures
Recent government decisions included a range of structural changes to pricing and spending mechanisms. Fuel prices were raised, and a new monthly pricing mechanism was adopted to reflect global fluctuations. Electricity and water tariffs were also adjusted. The measures further included increasing the price of natural gas supplied to factories and raising excise taxes on soft drinks, a move aimed at diversifying government revenue sources.
In the context of controlling public spending, the government approved a significant reduction in administrative expenses for government agencies by up to 20%, while directing an increase in profit distributions for state-owned companies, and raising municipal fees imposed on undeveloped investment lands to stimulate urban development.
Corporate tax: a strategic shift
Perhaps the most significant aspect of the reform package is Bahrain's announcement of its intention to introduce a new corporate income tax law. This move represents a pivotal shift in the Kingdom's fiscal policy, aligning with global and Gulf trends toward taxing the business sector to boost non-oil revenues, similar to steps taken by neighboring countries such as the United Arab Emirates and Saudi Arabia in recent years.
Context of the Fiscal Balance Program
These decisions cannot be viewed in isolation from the "Fiscal Balance Program" previously launched by Bahrain with the support of its fellow Gulf Cooperation Council (GCC) members (Saudi Arabia, the UAE, and Kuwait). This program primarily aims to achieve a balance between government expenditures and revenues (eliminating the fiscal deficit). These austerity and reform measures are essential to ensuring the stability of public debt and maintaining the Kingdom's credit rating, thereby bolstering confidence in the Bahraini economy and attracting foreign direct investment.
Economic Vision 2030
These reforms are central to Bahrain's Economic Vision 2030, which is based on the principles of sustainability, competitiveness, and fairness. By restructuring subsidies and directing them to those who need them most, and by imposing fair taxes on large corporations, Bahrain aims to build a productive economy capable of self-sustaining growth, independent of the volatility of global energy prices, thus ensuring a more stable and prosperous future for its citizens.
