Despite the recent rise in oil prices, Bahrain, the “weakest link” of the wealthy GCC economies, still needs a rescue, according to Bloomberg.
Bahrain needs the price of a barrel of oil to be higher than $88 in order not to record a budget deficit this year, according to the International Monetary Fund, which is the highest price compared to the needs of other Gulf countries.
Bloomberg says that Bahrain is preparing to take advantage of rising oil revenues in the coming months to finance budget deficits that widened in the wake of the epidemic and left it behind its neighbors, the largest energy exporters in the world.
She pointed out that Bahrain actually benefited from Gulf support of $5.6 billion, with $500 million granted for development projects during the first three months of this year.
Chief Middle East economist at Oxford Economics in Dubai, Scott Livermore, said that “ambitious reform is required to address Bahrain’s large financial imbalances,” noting that the Gulf kingdom will need more Gulf support in the medium term.
Bahrain, a small oil producer, received $10 billion in aid from Saudi Arabia, the UAE, and Kuwait over five years in 2018.
But Bahrain’s Finance Minister, Shaikh Salman bin Khalifa Al-Khalifa, told Bloomberg last year that his priority – for now – was to restore economic growth rather than increase revenues.
“We really want to see the recovery take hold before we take any additional steps in this regard,” he said.
The International Monetary Fund expects Bahrain’s reserves to average $2.5 billion in 2022, covering just 1.2 months of imports.
Bahrain’s budget deficit is expected to be around 9 percent of economic output this year, more than double Oman’s 2.4 percent deficit, according to the International Monetary Fund.
In January, the lead analyst for Bahrain at Fitch Ratings said Manama would likely need more financial assistance from its Gulf neighbors starting in 2023, Reuters reported.
In April, Moody’s credit rating agency revised Bahrain’s outlook to negative with a B2 rating.