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Abu Dhabi, UAEMonday 22 October 2018

Bahrain receives pledge of support from GCC peers to help its economy

Gulf neighbours Kuwait, Saudi Arabia and the UAE will offer new aid to strengthen the country's "fiscal stability"

Gulf neighbours Kuwait, Saudi Arabia and the UAE have pledged to support Bahrain's economy and its 'fiscal stability'. Reuters 
Gulf neighbours Kuwait, Saudi Arabia and the UAE have pledged to support Bahrain's economy and its 'fiscal stability'. Reuters 

Bahrain said on Wednesday that its Gulf neighbours Kuwait, Saudi Arabia and the UAE will offer new aid to strengthen the country's "fiscal stability" amid concerns over its economy.

A statement early on Wednesday carried by the state-run Bahrain News Agency quoted Finance Minister Sheikh Ahmed bin Mohammed Al Khalifa as saying that its three GCC peers are "set to announce a new programme designed to strengthen Bahrain's fiscal stability".

It did not give further details of the financial aid package or when it is expected to be announced.

Meanwhile, a statement carried by the Saudi Press Agency said the countries are committed “to consider all options to support the Kingdom of Bahrain and to finalise an integrated programme".

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The move seemed aimed at calming markets on concerns about Bahrain's economy. Bahrain’s credit risk rose the most in emerging markets this month. The cost of insuring the nation’s debt against default for five years jumped 170 basis points on Monday to 609. The dinar, whose peg to the dollar has been effectively unchanged since 1980, fell on Tuesday in the onshore market to the weakest level since at least 1988, according to a Bloomberg report.

The central bank’s foreign exchange assets plummeted to a 2001 low of about US$1.2 billion last year. They have almost doubled since, helped by cash raised through bond sales, but the government has about $2bn (Dh7.35bn) of interest payments on bonds through 2019, according to data compiled by Bloomberg.

Bahrain's central bank said on Tuesday that it’s committed to keeping the dinar’s peg, spurring a decline in the yield on Bahrain’s dollar bonds due in 2022.