Bahrain needs to make greater efforts to recalibrate its financial situation, even if it manages to secure additional regional support, according to the International Monetary Fund (IMF). Ali Al-Ayed, head of the IMF mission in Bahrain, stated in an interview with Bloomberg that once Bahrain recovers from the economic downturn caused by the COVID-19 pandemic, the island nation is likely to need to "implement urgent reforms at the public finance level." Al-Ayed added, "Whether this depends on support from the Gulf Cooperation Council, which may help or may not facilitate this adjustment, the adjustment remains essential."
The smallest Gulf state was already facing financial distress prior to the pandemic, having to bolster its finances with a $10 billion bailout from its wealthier neighbors in 2018. The Bahraini budget deficit is expected to shrink by half this year after it was widened by falling oil prices and the pandemic's contribution to a record level of 18% of economic output in 2020, according to IMF estimates. Going forward, the deficit is expected to begin growing again at least until 2026. Al-Ayed noted that the IMF expects Bahrain’s economy to grow by 3.3% this year, although the March estimate might be adjusted to account for the recovery in oil prices.
