Dubai: Bahrain has announced a broad set of fiscal reforms aimed at strengthening public finances, as the kingdom faces rising pressure on its credit profile.
The measures include increases in fuel prices, electricity and water tariffs, higher natural gas prices for industrial users, and a 20 per cent reduction in government administrative spending.
Bahrain also plans to introduce a new corporate income tax law targeting domestic companies, marking a significant change in the country’s tax system. Authorities did not provide a timeline for when the tax would take effect.
The reforms form part of Bahrain’s ongoing financial reform programme and are intended to improve fiscal sustainability. Fuel prices will be adjusted under a newly introduced monthly pricing mechanism, while taxes on carbonated beverages will be raised.
Additional steps include higher dividend payments from state-owned companies and increased municipal fees on undeveloped investment land. The government did not disclose detailed implementation dates for the measures.
The announcement comes amid mounting fiscal pressure. In November, credit rating agency Standard & Poor’s downgraded Bahrain’s sovereign credit rating from B+ to B, citing rising government debt and higher interest costs. The agency expects the country’s fiscal deficit to reach 7.6 per cent of gross domestic product in 2025.
Despite these challenges, Bahrain has continued to attract investor interest. The government raised around $5 billion from global debt markets this year, supported by strong demand for its bonds, particularly Islamic sukuk.
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