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MANAMA: Central Bank of Bahrain (CBB) Governor Rasheed Al Maraj is expecting a ratings upgrade after the country has made good progress in tackling its budget deficit and is committed to undertake more reforms.
Mr Al Maraj said Bahrain has gone a long way in tackling its budget deficit with the introduction of a Value Added Tax from this year.
“The government has cut subsidies, raised fees and is pushing economic diversification and inward investment programmes,” he added.
The country, said the central bank governor, remains committed to more reforms following last year’s $10 billion aid package from Gulf allies Saudi Arabia, Kuwait and the UAE.
“The first payment was made after the aid deal was signed last year and the support will continue as we roll out our fiscal balance programme,” Mr Al Maraj said during the Euromoney GCC Financial Forum 2019 at the Four Seasons Hotel Bahrain Bay, declining to give more details.
“I think the programme has put out a clear plan to the market about how we are going to deal with our budget deficit and public debt. It has had a tremendous impact on the level of confidence about Bahrain and bond prices have tightened by 50-60 basis points.”
The central bank governor said he expects Bahrain’s economy to grow at about 2.5 per cent this year, slightly slower than last year.
On the need for external funding via bonds, he said while the $10bn package had not removed the need for fundraising this year, debt would be raised in smaller amounts than in previous years. Financing plans for this year will be decided after the budget is approved, he told reporters.
Mr Al Maraj reiterated that Bahraini dinar’s peg to the US dollar was the anchor of the central bank’s monetary policy and would remain as it provided stability.
Also speaking at the forum, investment promotion agency Economic Development Board (EDB) chief executive Khalid Al Rumaihi said Bahrain’s diversification drive will continue despite the Khaleej Al Bahrain oil discovery last year.
Last April, Bahrain announced it discovered at least 80bn barrels of tight oil and between 10 and 20 trillion cubic feet of deep natural gas – it was the country’s largest discovery since 1932.
“The oil discovery is a blessing, but it should not take away from the reforms we are making or the overall diversification strategy. We need to use oil wealth wisely. It allows this country to have security in the future,” Mr Al Rumaihi said.
“Oil price declines are tough but necessary drivers of change.”
Talking about the evolution of financial services across the world and in Bahrain and the factors spurring innovation, the EDB chief executive said Bahrain is one of the first globally to embrace global banking citing the kingdom’s open banking, crypto asset and crowdfunding regulations as examples.
“We have 28 entrants in our regulatory sandbox. We can embrace technology from outside but also local start-ups,” he said.
According to him it wasn’t technology but customer expectations that was disrupting banking and finance.
“Bahrain is putting in the building blocks to allow e-KYC to allow innovation. Bahrain can move very quickly in this regard. Technology isn’t the end goal, it’s the tool,” he said.
Apple co-founder Steve Wozniak, who was a keynote speaker at the forum, said he saw the Internet of Things, electric vehicles and artificial intelligence as major technology trends for this year and beyond.
Listing his three ingredients of success, Mr Wozniak said business thinking and marketing; deep product knowledge and including engineering expertise in the design process were what made Apple so successful.
According to him, a university education doesn’t add up too much.
“The computer is not worth as much as the person using it. In the end, the consumer always wins and the same can be said about banking.”
The Apple co-founder picked the third party App Store as the innovation that “changed my life the most, more than the iPhone”.
You need to “build a platform and allow other people who are smart to use it.”
Now in its eighth year, the forum co-hosted by Euromoney and the EDB provides a platform for more than 800 finance industry participants including leading bankers, institutional investors, asset managers, policy makers, academics and stakeholders from across the globe.
This year’s conference theme is ‘The Reinvention of Financial Services’.
The event concludes today.
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