Bahrain has asked Gulf allies for financial assistance as it seeks to replenish its foreign-exchange reserves and avert a currency devaluation that could reverberate across the region, Bloomberg reported.
Saudi Arabia, the UAE and Kuwait were approached for aid, the news agency said, adding that wealthy Gulf States required the island kingdom to undertake reforms to bring its finances under control in return for the money.
Battered by oil price slump, Bahrain seems to be the most vulnerable in all six-Gulf nations. The oil price plunge raised questions over the sustainability of the dollar peg, which has been for long considered as a bedrock for economic stability for more than three decades.
Gulf countries are unlikely to let Bahrain sink in devaluation of its currency. Because, “If Bahrain was forced to devalue its currency it would probably start to raise questions about other currency pegs,” Bloomberg quoted analysts as saying.
The International Monetary Fund expects Bahrain’s budget deficit to be the highest in the GCC this year even as it narrows.
The central bank’s foreign reserves, including gold, have tumbled about 75 percent since 2014 to just above 522 million dinars ($1.39 billion) in August, according to the most recent official data.