Bahrain‘s cabinet has announced a planned series of new fiscal measures which are meant to protect the essential cost of living for citizens and expand their base of revenue to help stabilise public finances as they move to the next fiscal year, as of January 1st, 2006. At a meeting chaired by Crown Prince and Prime Minister Salman bin Hamad Al Khalifa in Gudaibiya Palace, various fiscal decisions were made that were targeted at the everyday costs of families and incorporated new tariffs aimed at businesses, undeveloped land, and certain types of non-residential services.
The focus of this financial package was to verify that homes will not see a rise in their utility rates and that further studies will be done on the Utility Support Program redesign and that all utilities will not undergo any rate changes at this time. This provided time for policymakers and also shielded many households from any drastic rate changes during the process of determining what the best course of action will be in the months to come.
The government is also moving forward rapidly with its revenue reforms agenda. Revenue reforms include a proposed 10% tax on profits made by local companies that exceed BD 200,000 (subject to legislative approval and expected to begin in January 2027), increased excise taxes on sugary drinks, the introduction of a new monthly fee of 100 fils per square meter for the use of undeveloped serviced investment land (starting in January 2027), and a new sewerageservice fee of 20% of water consumption for non-residential customers (starting in January 2026).
In addition to revenue-generating initiatives, the government is also changing the labour market. The Cabinet has directed a staged review and recalibration of health and expatriate labour fees over four phases to be rolled out starting January 2026. The purpose of this review and recalibration is to incentivise employers to hire Bahraini nationals while protecting the most vulnerable worker categories (i.e., domestic workers). Moreover, the government will gradually transition energy pricing for businesses and industry to a cost-based pricing system.
As Bahrain has begun introducing changes to its economy, the government has indicated many changes have been made and that these are part of the overall Fiscal Balance Program. The government projects a more than twofold increase in revenue from sources other than oil between 2018 and 2024. Growth is considered a key driver behind the implementation of these initiatives. The implementation of such changes, while necessary, is often viewed as politically contentious. In addition, the Cabinet has indicated that it will reduce its administrative expenditures by roughly twenty (20) per cent and that government-owned businesses have been asked to contribute to the government’s budget on an annual basis.
Economists have indicated that there is a common approach across the Gulf region, where subsidy programmes for citizens are used to support them, maintain a stable society, and develop a larger tax base, all while reducing expenses related to government programmes and services to ensure future fiscal soundness. In the coming months, Bahrain must demonstrate whether a cautious, phased approach will achieve both financial protection and social stability for its citizens.
