The government has reportedly ditched plans to reform Bahrain’s costly subsidy system amid fears that such austerity measures could provoke further public unrest. It comes just as the International Monetary Fund (IMF) has called on Manama to make further fiscal and structural reforms, to strengthen government finances and promote sustainable growth.
In a report issued on 7 May, following a recent Article IV review of the economy, the IMF said it “saw merit in additional fiscal consolidation measures”, such as phasing out untargeted subsidies, introducing direct taxes and reducing the scope of exemptions to the recently introduced value-added tax (VAT). However, the very same day a report from Reuters, citing unnamed officials, said Manama had scrapped a plan to reform its subsidy system. “That reform is not the priority,” an unnamed source told the news agency.
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