The IMF came back to town and it seems that after the Executive Board follow up Report of August 21, someone has been listening and accepting sound economic advice.
The IMF Executive Board reported at that time:
“Although economic and physical market conditions have remained positive, physical and external vulnerabilities have increased in the wake of the oil price decline.”
While welcoming some developments, “they stressed an additional sizeable and frontloaded fiscal adjustment is urgently needed, to restore fiscal sustainability and reduce large fiscal and external financing needs”.
“Sustained fiscal efforts are needed over the medium term, to put that on a downward path and rebuild policy space.”
This week’s government action plan, for the rest of 2017, will cut government spending by BD800 million, with a similar amount to be cut as well, in 2018.
Now, it remains to be seen, where those cuts will come.
The IMF recommending measures curbing Bahrain’s wages bill, reducing energy subsidies, while raising non-oil revenue including through the VAT and “exploring other revenue raising measures”.
It seems that some of these measures will be addressed, but as always, the devil is in the detail.
The VAT introduction, is a mess, lots of businesses resisting the issue, not being ready for its implementation, further delaying the entry into force, yet again.
The government simply needs the revenue to gain needed financial liquidity; fine to remove the petrol subsidy, but then there had to be recompense, by raising water prices.
One subsidy replaced by another revenue source.
The IMF suggested the need for a strong communication campaign to explain adjustments, strengthening of public awareness, need and therefore support, so maintaining market confidence, by a successful debt management strategy, as Bahrain has now done.
What part of government austerity, don’t people understand, or be willing to understand?
Like people complaining because their “free house,” does not contain enough bedrooms, or that subsidies have been removed, or the VAT is coming.
“Structural reforms are needed to support the peg to the US dollar” as a key to foreign investment, and “stressed the importance of the central bank, not lending to the government.”
There is a need for structural reforms in, “promoting competition, privatising state-owned enterprises and promoting greater (economic) diversification.”
These things, according to yesterday’s announcements, will be addressed.
So a sort of “yes, but” IMF finding, “underscoring the need to further strengthen economic statistics, to support the decision making process.”
Hopefully, if the announced adjustments are made, the subsequent IMF report, will be more welcome reading.
Finally a word on Marina West, which remains a bete noir for many, the subject of numerous articles and letters.
An impeccable source told me to “stop bleating,” the money has irrevocably gone.
Not just a small investors who have lost out, but also “big-ups” as well.
The money moved, together with other well sourced funds, to a hotel proposal in Oman, supposedly guaranteed to make a motzza, for the investors.
When that collapsed, the Marina West developer, and his extended family, with huge debts to pay, simply left Bahrain, for Switzerland.
Problem insoluble, lots of anger, too many bodies. Too many losses.
Deposit and nest egg investment, gone with the developer, the building now good only for demolition.
An unwelcome, pebble in the shoe, a reminder, of what might have been.