Bahrain must reform state finances urgently, IMF official urges

Bahrain should consider revising its subsidy system to make it more efficient while curbing a large public sector wage bill, a senior IMF official said. (AFP)
Updated 31 May 2018
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Bahrain must reform state finances urgently, IMF official urges

DUBAI: Bahrain must urgently reform its finances to cut a large state budget deficit and support its currency, a senior International Monetary Fund official said after annual consultations with the government.
Fiscal steps which the government has already announced would cut the deficit to 11 percent of gross domestic product in 2018 from 14 percent last year and around 18 percent in 2016, Bikas Joshi, who led an IMF mission to Manama, said in a statement late on Wednesday.
But without further measures, non-oil revenue will stagnate and economic growth will slow, Joshi said, noting that public debt increased to 89 percent of GDP last year and foreign reserves were low, covering only 1.5 months of non-oil imports.
The cost of insuring Bahrain’s sovereign debt against default jumped near multi-year highs this month because of investors’ concern over the country’s debt burden as US interest rates rise.
“Fiscal consolidation would support the peg to the US dollar, which continues to provide a clear and credible policy anchor,” Joshi said.
He added that Bahrain should, for example, consider revising its subsidy system to make it more efficient while curbing a large public sector wage bill.
However, Bahrain’s financial sector is stable, thanks to big capital buffers, and GDP is expected to grow 3.2 percent in 2018 on the back of a recovery in oil production, infrastructure projects and rising refinery and aluminum production capacity, Joshi said. GDP grew around 3.8 percent in 2017.


Fintech makes inroads in US banking market, but revenue share minimal — Accenture

Updated 48 min 34 sec ago
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Fintech makes inroads in US banking market, but revenue share minimal — Accenture

  • Around 19 percent of financial institutions in the US are new entrants, such as challenger banks, non-bank payments institutions and big tech companies
  • New entrants account for 63 percent of financial players in the UK

NEW YORK: Financial technology startups and other new entrants are making inroads in the US banking market, but have yet to capture a threatening share of bank revenues, according to research published by Accenture on Wednesday.
Around 19 percent of financial institutions in the US are new entrants, such as challenger banks, non-bank payments institutions and big tech companies, according to the report. Yet they have amassed only 3.5 percent of the total $1.04 trillion in banking and payment revenues so-far, Accenture found.
In the UK, new entrants have made a larger dent, having captured 14 percent of the total €206 billion ($238.45 billion) in industry revenues, with the majority going to non-bank payments companies, according to the report.
Accenture assessed more than 20,000 banking and payments institutions across seven markets around the world to determine the level of change that digital technologies have brought about in banking.
Since the financial downturn, a growing number of companies across the world have sought to position themselves as cheaper and more user-friendly alternatives to banks by making better use of new technology.
Banking and payments institutions have decreased by nearly 20 percent from 2005 to 2017. Still, one in six current institutions is what Accenture considers a new entrant, or companies that have entered the market since 2005.
Their impact has varied by geography.
Tougher regulations and greater dominance of large banks have made the US a more difficult market for new entrants in areas excluding payments, Alan McIntyre, head of Accenture’s global banking practice, said in an interview.
“You still have a very robust banking market in the US,” McIntyre said.
More than half of new current accounts opened in the United States have been captured by three large banks, which have had more money to invest in digital than smaller regional players, he added.
In the UK the situation has been different, thanks in part to a push from regulators aimed at fostering greater competition in the financial sector and diminishing the dominance of large banks.
New entrants account for 63 percent of financial players in the UK, according to the report.
The report also found new entrants are taking over one third of new revenue, pointing to their potential to pose a greater competitive threat going forward.
In Europe, including the UK, 20 percent of banking and payments institutions are new entrants and have captured nearly 7 percent of total banking revenues, according to the report.