Bahrain targets revenue boost with fuel hikes, tariffs and corporate tax plan

Dubai: Bahrain has announced a comprehensive package of fiscal reforms aimed at strengthening public finances, marking one of the most far-reaching adjustments under the kingdom’s ongoing financial reform programme.

The measures include increases in fuel prices, electricity and water tariffs, higher natural gas prices for industrial users, and a 20 per cent cut in government administrative spending.

Bahrain also revealed plans to introduce a new corporate income tax law targeting domestic companies, a major shift in the country’s tax framework.

 The reforms are part of Bahrain’s efforts to improve fiscal sustainability and complete key elements of its government agenda. However, the official statement did not specify when the new measures would take effect or provide detailed implementation timelines.

Fuel prices will be linked to a newly introduced monthly pricing mechanism, while taxes on carbonated beverages will be increased. Additional steps include higher dividend distributions from state-owned companies and increased municipal fees on undeveloped investment land.

The announcement comes amid mounting fiscal pressure. In November, credit rating agency Standard & Poor’s downgraded Bahrain’s sovereign credit rating from “B+” to “B”, citing rising government debt and higher interest payment burdens. The agency has forecast a fiscal deficit of 7.6 per cent of gross domestic product in 2025, up from its earlier estimate of 7.1 per cent.

 Despite these challenges, Bahrain has continued to attract investor demand. The government raised around $5 billion from global debt markets this year, supported by strong appetite for its debt instruments, particularly Islamic bonds, or sukuk.