Remember the good old days of high oil royalties, which made life in Bahrain a breeze?
There were subsidies on fuel, food and commodities, cheap medicines, welfare in abundance, no roadblocks by thugs, bombs or terrorist danger.
We had wealthy visitors every weekend, music and nightlife, everything for joie de vivre!
Hmmm, Nirvana.
Now, however, there are those of us who recall at leisure the words of an old Eddy Arnold song, Black Cloud.
There’s a black cloud hanging over my head,
Down to my last buck.
With that old black cloud hanging over my head,
There ain’t no such thing as good luck.
Merely look out of the window, while the sun is still shining, and overhead there’s a big black cloud: the International Monetary Fund (IMF) cloud!
Umbrellas will give little protection, the winds of change are also blowing.
The IMF did a detailed study of the Bahrain economy and delivered a warning back in April.
On August 21 they came back with a follow-up report, assessing whether matters raised in April were adopted and, if so, what are the consequences.
Their conclusions are, at best, cautionary.
They advise that “fiscal and external vulnerabilities have increased in the wake of the oil price decline” and that additional fiscal adjustment is “urgently needed”, despite measures already taken to reduce the deficit, tackle public debt and generate additional non-oil revenues.
The introduction of VAT will provide some benefit to the government, helping it meet the cost of rising interest payments.
However, the IMF says “sizable external financing” and “structural reforms” are also needed to support the dollar peg and strengthen the international reserve position.
It warned Bahrain’s fiscal deficit is now almost 18 per cent of GDP, while government debt rose to 82pc of GDP.
Meanwhile, international reserves declined from $5.2 billion to $2.4bn between 2012 and 2017.
The current account deficit has widened to 4.7pc, meaning the value of goods that Bahrain imports exceeds its exports.
One IMF recommendation is to discontinue central bank lending to the government, while increasing issuance of government securities to rebuild confidence in the economy and attract investment.
“Additional sizable and frontloaded fiscal adjustment is urgently needed to restore fiscal sustainability and reduce the large fiscal and external financing needs,” says the IMF.
“Sustained fiscal efforts will be needed over the medium term to put debt on a downward path and rebuild policy space.”
So a salutary follow-up assessment, which will hopefully give the government a better guide to what still needs to be done.
Hence, for example, an increase in the Commercial Registration (CR) fees, despite protests from those who’ve had it so good for so many years.
A system that allowed the setting up of BD2 “companies” adds nothing to the economy, especially when they are used to facilitate cheap labour by supporting the “free visa” black market.
Authorities have, through necessity, weeded out the numbers to include only realistic investors and businesses.
However, if the IMF update tells us anything it is that Bahrain’s report card should read: “Can do better!”
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