Dubai, Washington

Bahrain’s Gulf Arab allies met to review a financial support programme designed to help the country repair its finances and stave off a possible currency devaluation that could roil regional markets.

The finance ministers of Saudi Arabia, the UAE and Kuwait met with their Bahraini counterpart on Wednesday in the island-kingdom. They said their countries were “committed to backing Bahrain’s fiscal stability” and economic growth, according to the official Bahrain News Agency.

The ministers reviewed a report prepared by a joint technical team in coordination with the Arab Monetary Fund, BNA said. The AMF is an Abu Dhabi-based organisation modelled on the International Monetary Fund.

Bahrain’s economy has been affected by low oil prices since 2014. Investors fear that without aid, the small kingdom will be forced to abandon the dinar peg to the dollar, triggering speculation that its neighbours would follow suit. Bahrain officials have repeatedly said they have enough reserves to maintain the peg.

“At this stage, it’s still talk, there is nothing tangible,” said Mohieddine Kronfol, the Dubai-based chief investment officer for global sukuk, Middle East and North Africa fixed income at Franklin Templeton Investments. Any aid package needs to come with “some funds behind it, some dollars that people can look at but also there needs to be credible plan,” he told Bloomberg TV.

The yield on Bahrain’s dollar-denominated bonds due 2028 fell two basis point to 8.1 per cent as of 8:31am in London, according to data compiled by Bloomberg.

Bloomberg News reported this month that the multi-year programme discussed between Bahrain and its allies would involve spending cuts and measures to increase non-oil revenue, including the introduction of a value-added tax.