Bahrain needs to scale back subsidies to cope with rising pressure on state finances - but in a tense political climate it will have to offer its people jobs and better services in return.
The Gulf island kingdom is the smallest oil producer in the region and the first country to grapple head-on with these reforms, but others are watching closely since they will eventually have to make similar changes as they diversify away from oil, analysts say.
The government plans to significantly increase spending on housing, health and education over the next two years after a recent security crackdown renewed complaints by the Shi'ite majority population that it is neglected by the Sunni-led government.
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