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Bahrain Forex Reserves Tumble
World Economy

Bahrain Forex Reserves Tumble

Bahrain’s foreign-currency reserves tumbled 11% in February, extending a decline that has fuelled speculation that the island kingdom would either tap international bond markets soon or seek financial support from other Persian Gulf Arab monarchies (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar and Oman), Bloomberg reported. Net foreign assets dropped to 645.2 million dinars ($1.7 billion), from the 725.9 million dinars in January, according to central bank data released on Sunday.

Overall, they’re down 71% from a peak of 2.24 billion dinars in November 2014. Bahrain has been more vulnerable to slumping oil prices and regional political instability than richer Persian Gulf Cooperation Council states. With authorities expected to maintain the dollar peg, Bahrain “will likely either tap international markets or receive support from other (P)GCC governments,” said Carla Slim, Dubai-based economist at Standard Chartered. Reserves will likely “remain under pressure this year,” she said. The drop in reserves comes nearly a month after the International Monetary Fund warned that Bahrain needs to make significant spending cuts to restore stability to its budget and improve investor confidence.

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