Bahrain expects $3.2 billion deficit in 2021, 5% economic growth

DUBAI (Reuters) - Bahrain expects to post a deficit of 1.2 billion dinars ($3.20 billion) in 2021, state news agency BNA said, citing the finance ministry.

FILE PHOTO: A shopkeeper counts his daily cash in Bahraini dinars as he opens his shop in downtown Manama, Bahrain, June 27, 2018. REUTERS/Hamad I Mohammed

The oil-producing Gulf state projected a budget of 3.6 billion dinars for 2021 with revenues expected to amount to 2.4 billion dinars, BNA said.

For next year, total expenditure is estimated at 3.57 billion dinars, against total revenues of 2.46 billion dinars, resulting in a slightly lower deficit of 1.1 billion dinars.

Bahrain’s economy contracted by 5.4% last year, the International Monetary Fund (IMF) has estimated, as the COVID-19 pandemic hurt vital sectors such as energy and tourism.

The tiny Gulf state, which based the 2021-2022 budget on an oil price assumption of $50 a barrel, expects the economy to grow 5% this year, BNA said late on Tuesday.

Sovereign wealth fund Mumtalakat will double its contributions to government revenues, said the agency, as Bahrain seeks to boost non-oil revenues.

Bahrain has accumulated a large pile of debt since the 2014-2015 oil price shock. In 2018 it received a $10 billion financial aid programme from Gulf allies that helped it avoid a credit crunch.

BNA cited Finance and Economy Minister Sheikh Salman bin Khalifa al-Khalifa as saying that the country remains committed to achieving the objectives of the fiscal balance program - a set of fiscal reforms linked to the financial aid.

“This budget makes clear Bahrain’s continued commitment to the Fiscal Balance Program, despite the unprecedented challenges of COVID-19, with core government expenditure remaining under tight control,” the minister was quoted as saying.

Public debt rose to 133% of GDP last year from 102% in 2019, the IMF has said, cautioning that the country needs to reduce government debt once economic recovery from the coronavirus crisis firms up.

($1 = 0.3771 Bahraini dinars)

Reporting by Alaa Swilam and Davide Barbuscia; Editing by Chris Reese and Steve Orlofsky