The International Monetary Fund’s Executive Board concluded the 2025 Article IV consultation with the Kingdom of Bahrain, warning that a worsening fiscal position and high public debt are heightening fiscal and macrofinancial vulnerabilities despite continued nonhydrocarbon-led growth and low inflation. Directors backed the exchange rate peg to the US dollar as the monetary anchor and urged sustained medium-term fiscal consolidation and a reduction in monetary financing. Real GDP growth moderated to 2.6 percent in 2024 as oil output contracted, while nonhydrocarbon growth reached 3.7 percent and CPI inflation rose to 0.9 percent. The overall fiscal deficit widened to 11 percent of GDP and gross government debt rose to 134 percent of GDP, with the government’s overdraft at the Central Bank of Bahrain exceeding a quarter of GDP in 2024 before declining 8 percent through October 2025; foreign exchange reserves increased 11 percent but remained low at just over two months of prospective nonhydrocarbon imports. Directors welcomed recently announced fiscal initiatives including a corporate income tax, other revenue measures, and energy and utility price reforms, but called for further steps such as reducing and budgeting extrabudgetary spending, increasing tax revenues, and narrowing broad subsidies while targeting support to vulnerable households, alongside stronger public financial management, fiscal transparency and a medium-term fiscal framework with a clear fiscal anchor. On the financial side, they assessed banks as profitable and well-capitalized, urged continued monitoring and a stronger macroprudential toolkit, encouraged timely adoption of upgraded bank resolution and crisis prevention frameworks, and recommended vigilance over crypto assets; they also highlighted the need to strengthen reserves, enrich liquidity management tools and develop the local bond market. The authorities did not consent to publication of the staff report, and the next Article IV consultation is expected on the standard 12-month cycle.
International Monetary Fund 2026-01-27
International Monetary Fund Executive Board calls on Bahrain to deepen fiscal consolidation to put public debt on a downward path in 2025 Article IV
The IMF's Executive Board concluded the 2025 Article IV consultation with Bahrain, highlighting fiscal and macrofinancial vulnerabilities due to a worsening fiscal position and high public debt. Directors supported the exchange rate peg to the USD and recommended sustained fiscal consolidation, enhanced public financial management, and vigilance over crypto assets, while noting the need for stronger reserves and a developed local bond market.