S&P Global Ratings has revised Bahrain’s outlook to ‘stable’ from ‘negative’ on the back of new fiscal reforms aimed at improving non-oil revenues and cutting state spending, Reuters quoted the ratings agency, as saying in a statement.

Rated below investment grade, Bahrain was bailed out to avoid a credit crunch in 2018 with a $10 billion package from wealthy neighbours, Saudi Arabia, Kuwait and the United Arab Emirates.

That money was linked to a set of fiscal reforms, but after the coronavirus crisis strained its finances, Bahrain in September postponed plans to balance its budget by two years and announced plans to increase a value-added tax.

“The Bahraini government recently announced additional fiscal reforms to strengthen non-oil revenue and rationalise expenditure. These measures, along with the more supportive oil price environment, should improve the sovereign’s fiscal position”, S&P said in a statement this weekend.

The agency said it expects the government to benefit from additional financial support from its Gulf neighbours, if needed.

Bahrain will double value-added tax to 10 per cent next year, a move which S&P estimated could contribute receipts of about 3 per cent of gross domestic product in the next few years, up from about 1.7 per cent this year.

The Gulf state is also planning to rationalise operational government expenditure and social subsidies in 2023 and 2024, a move, which shifts the focus of its reforms more on the spending side than on raising non-oil revenues.

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