Gulf Insider sat down with Anwar Murad, Deputy CEO-Banking of Al Salam Bank- Bahrain to discuss the bank’s position in view of the recent economic crisis.
Established in 2006, Al Salam Bank-Bahrain is now one of the largest Islamic banks in the country, solidifying its presence in the Islamic Banking Arena by acquiring Bahraini Saudi Bank and BMI Bank. Mr Anwar explained that Al Salam is a very ambitious bank and wishes to further expand its reach in the region and to help stabilize the economy as it works through the oil crisis.
Gulf Insider asked Mr Anwar what are the biggest challenges to the GCC economy in the coming years. He said that the biggest challenge is “how fast we can adapt and diversify our revenue”. He adds that the recent oil cutbacks have been a “wake-up call, for GCC economies to work at creating opportunities”.
This view was corroborated in a report published by AlKhabeer Capital (2016) on GCC Budgets: Adapting to the new oil reality, which states that “The recent budgets in Saudi Arabia, Qatar, Oman and the UAE, for the first time in decades, saw cutbacks in expenditure, subsidy reforms and plans to diversify revenue base, indicating that the Gulf countries are gearing up to cope with the recent downturn in oil markets”. Further, “What sets the 2016 budgets apart from those announced in previous years is not the numbers or the allocations but the emergence of a political will to improve efficiencies, curb wasteful expenditures and instill fiscal discipline”.
In a report on the Annual Meeting of Arab Ministers of Finance, prepared by the IMF (2016), it states that the oil sector remains a dominant form of commerce in most GCC countries. “However, it creates few jobs directly, while oil revenue is often used to finance an oversized public sector”. With oil prices set in the low $50’s per barrel, which Mr Anwar believes will stabilize to about $60 per barrel, governments will have to base their budgets on this pricing scale. He believes that the smart way for governments to invest would be to focus on the industrial side, especially manufacturing; which can bring about key investments into the economy.
He adds that 2017 is a very crucial year, a period of realignment for everybody. Mr Anwar admits that the oil crisis has been a shock in the beginning. However, now that people have accepted the reality of low oil prices, it’s time for creative solutions. He believes that the private sector is a crucial factor in recovery; believing that now is the time for citizens to invest in the future of the region. He says that with the proper facilities, opportunities, and regulations; the private sector can give a boost to the GCC economy.