Bahrain unveils special reform package to bolster public finances

These measures include increases in fuel prices, higher electricity and water tariffs for certain categories, and greater dividend contributions from state-owned enterprises

Bahrain’s government has unveiled a comprehensive package of fiscal reforms aimed at curbing public expenditure, generating new revenue streams, and safeguarding essential subsidies for citizens.

These measures include increases in fuel prices, higher electricity and water tariffs for certain categories, and greater dividend contributions from state-owned enterprises, reported the Bahrain News Agency.

The cabinet emphasised that electricity and water prices will remain unchanged for the first and second tariff bands for citizens’ primary residences, including homes accommodating extended families, it stated.

These reforms are aligned with Bahrain’s Economic Vision 2030, which seeks to reinforce fiscal discipline, diversify revenue sources beyond crude oil, and ensure long-term fiscal sustainability.

The measures build on progress under Bahrain’s Fiscal Balance Programme, under which non-oil revenues more than doubled between 2018 and 2024 while recurring government spending was reduced, supporting steady economic expansion. 

Over the past two decades, gross domestic product increased fivefold from around $9 billion to $47 billion, average wages for Bahraini workers more than doubled, and inflation remained comparatively low relative to major advanced economies.

The measures align with Bahrain’s Economic Vision 2030, supporting expenditure discipline, revenue diversification beyond hydrocarbons and long-term fiscal sustainability, while protecting households from cost-of-living pressures, said the BNA report.

The cabinet also agreed to defer any changes to the subsidy mechanisms for electricity and water used in citizens’ primary residences until further studies are completed. 

At the same time, it approved amendments to utility consumption tariffs for other categories, with implementation scheduled to begin in January 2026, said the BNA report.

Under the proposed reforms, a 10% corporate income tax will be levied on companies with revenues exceeding BD1 million ($2.6 million) or annual net profits above BD200,000.

The new corporate tax framework is expected to come into force in 2027, subject to the completion of necessary legislative and regulatory approvals.

In addition, Bahrain plans to increase natural gas prices for businesses and reduce administrative government spending by 20% as part of broader cost-cutting efforts.

The government also aims to improve the utilization of undeveloped investment land that already has infrastructure in place by introducing a monthly fee of 100 fils per sq m, with implementation anticipated in January 2027.

© ZAWYA