According to Reuters, the House of Representatives approved a Gulf Arab agreement to introduce VAT after a royal decree ordered parliament to hold an extraordinary session on Sunday, BNA reported, without giving details of the vote.
The move came a few days after Bahrain’s wealthier neighbours Saudi Arabia, the United Arab Emirates and Kuwait offered a $10 billion aid package to avoid the risk of a debt crisis in the country, which was also tied to fiscal reforms.
The bill is yet to be approved by the parliament’s upper house, which is expected to hold a similar session later this week.
Introducing VAT at a 5 per cent rate was part of a Gulf Cooperation Council (GCC) agreement in 2018, a big step for governments that have traditionally levied little tax and relied on instead on oil revenues.
Other sensitive reforms, including changes to the pension system and a new subsidy programme, are still pending as part of Bahrain’s efforts to fix its public finances.
The kingdom has been hit hard by a drop in oil prices in recent years, with its dinar sliding to its lowest in more than a decade.
The Gulf state released a 33-page fiscal plan on Friday to fix its debt-burdened finances and essentially abolish its budget deficit by 2022.
The plan, which promises further cuts in public spending, comes at a sensitive time as the kingdom prepares to hold an election next month
, the second ballot since 2011 when protesters took to the streets demanding democratic change.
The yield on Bahrain’s dollar bond due 2023 edged down 6 basis points to a seven-month low of 5.64 per cent on Friday after the Gulf state announced the aid package from its neighbours.
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