Economy

Bahrain to increase oil revenue contributions to wealth fund

February 3, 2025, 9:00 AM

To enhance the Future Generations Reserve wealth fund, Bahrain's King Hamad bin Isa Al Khalifa has formally approved plans to increase contributions from oil revenues

2006 law amendment
Approved by King Hamad
Increased oil contributions

Bahrain has approved plans to increase its contribution from its oil revenues to its Future Generations Reserve wealth fund.

King Hamad of Bahrain approved a new modified savings format, amending the 2006 law that dates back to when the sovereign wealth fund was established.

The fund was created to allocate and invest amounts deducted from oil revenues for future purposes.

The amount allocated under the new law depends on the price of oil.

When the price of oil is between $40 and $60, the fund is allocated $1 from every exported barrel. The contribution increases to $2 for every barrel when its price is between $60 and $80. It goes up to $3 when oil is between $80 and $100, $4 if the price is between $100 and $120, and $5 if it goes over $120 per barrel.

Since January 2023, Bahrain has contributed $1 from every barrel of oil exported to the fund if the price is above $40 per barrel.

Brent crude prices were trading around $77 a barrel on Friday.

Bahrain’s oil breakeven prices

The change follows approvals from the Shura Council and the Council of Representatives and will take effect from the next fiscal year, Bahrain News Agency reported.

Global SWF, a research company that specialises in sovereign wealth funds, said Bahrain’s government in 2020 withdrew $450 million, or half of its assets at the time, to maintain economic stability during the early stages of the Covid-19 pandemic.

In 2023, it achieved a 9.6 percent return, outperforming its benchmark. It allocates 15.5 percent of its portfolio to alternative assets, with plans to increase this allocation in the coming years, Sheikh Ali Al Khalifa, CEO of the fund, told Global SWF.

The Sovereign Wealth Fund Institute, which also tracks SWFs, says the Future Generations Reserve fund has $680 million in assets.

Bahrain, the smallest country in the GCC bloc of six with a population of almost 1.5 million people, requires oil to be about $125 per barrel to achieve budgetary equilibrium.

The ministry of finance said last week that its public debt has risen to almost BHD18 billion ($48 billion).

This week, members of parliament in the kingdom supported plans to impose a tax on expatriate remittances, which is expected to bring in less than 0.1 percent of Bahrain’s GDP, which stands at $47.8 billion.