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Why the GCC is pledging support to Bahrain

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Why the GCC is pledging support to Bahrain

The UAE, Saudi Arabia and Kuwait are set to announce a programme designed to support economic reforms and fiscal stability in Bahrain.

Their pledge comes as the Bahraini dinar fell for a fourth day in the onshore market to its weakest level since 1988, while the cost of insuring its debt against default for five years jumped 170 basis points – the most since records began in 2008 – to 609. The International Monetary Fund expects the island kingdom’s debt to exceed 100 percent of economic output in 2019.

In the statement, the three countries said they were in talks “to confirm their commitment to consider all options to support the kingdom of Bahrain and to finalise an integrated program that will soon be announced to enable the kingdom of Bahrain to support its economic reforms and fiscal stability.”

Bahrain has projected a state budget gap of $3.5 billion in 2018 and, according to IMF estimates, is the only Gulf oil producer that needs prices to climb above $100 percent in order to balance its budget.

In this edition of Inside AB, Jeremy Lawrence and Bernd Debusmann look at why the GCC is stepping in to help – and also why the island kingdom has a brighter economic future than the short term figures suggest.


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