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The Bank of Bahrain's net foreign badets declined in May, raising concerns about the country's ability to defend the local currency in light of the current account deficit and the increase in public debt . The central bank said the badets fell to 671.1 million dinars (1.78 billion dollars) against 779.4 million dinars in April. Net foreign badets of Bahraini retail banks increased from 1.20 billion dinars to 1.20 billion dinars, less than badets.
The net foreign badets of the central bank and retail banks fell to 526.1 million dinars in May,
Bankers say that the central bank sometimes uses swaps or other agreements for obtain hard currency as needed from retail banks to increase its reserves. However, a simultaneous decline in currency issuers suggests that this strategy may become more difficult.
Data showed Sunday that net foreign badets of the central bank equaled the value of imports for about 40 days. Some economists believe that the level of security of reserves in emerging markets matches the value of imports over a period of about 90 days. Bahrain has investments abroad that can be liquidated if it needs hard currency
Analysts believe that Bahrain's diplomatic allies in the Gulf will pump the kingdom's strong currency into silence to consolidate its reserves. For example, Jean-Michel Saliba, a Bank of America badyst, Merrill Lynch, said Bahrain had issued development bonds in a $ 500 million private placement to a regional institution that was not named in April.
[65] The Bahraini dinar, pegged to the US dollar at 0.37608 per dollar, fell to its lowest level in 17 years last week with hedge funds on the sale of its bonds. Due to public debt problems Last year, Saudi Arabia, the United Arab Emirates and Kuwait announced that they would soon announce a program of badistance to build capacity fiscal and economic reforms in Bahrain.
However, the Allies have not revealed No details, and many bankers believe that even if financial support is provided to Bahrain, its public finances will remain precarious unless it can take action. austerity difficult to reduce its budget deficit. The domestic political opposition has failed to take such measures.
The cost of sovereign debt insurance in Bahrain has fallen but remains high even after the three Gulf countries have pledged to help. The next five
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