Bahrain Seeking Aid to Repair Finances

Bahrain and its Persian Gulf Arab allies are said to be making progress on an aid program to help the island-kingdom repair its finances and avoid a devaluation that could roil neighboring markets, Bloomberg reported. Officials from Bahrain, Saudi Arabia, the United Arab Emirates and Kuwait are discussing a multi-year program that would involve spending cuts and measures to increase non-oil revenue, including the introduction of a value-added tax, according to five people with knowledge of the matter. They asked not to be identified because the details aren’t public. The Arab Monetary Fund, an organization modeled on the Washington-based International Monetary Fund, has been involved in the discussions, some of the people said. The fund, based in Abu Dhabi, may also help to monitor the program’s implementation. Bahrain’s economy is the smallest among the six members of the oil-rich (Persian) Gulf Cooperation Council. But investors fear that without aid to help bolster low foreign-exchange reserves and cut ballooning debt, the tiny kingdom will be forced to abandon the dinar peg to the dollar, triggering speculation that its neighbors would follow suit.