Dubai: Saudi Arabia, Kuwait and the United Arab Emirates will soon sign an agreement to provide up to $10 billion (Dh36.7 billion) of financial support to Bahrain, Kuwait’s Al Rai newspaper said on Thursday, quoting an unnamed Gulf diplomatic source.
The agreement will be signed in Bahrain after the ministers complete their current visit to Jordan, where they are concluding a financial aid deal for that country, the newspaper reported.
“A Gulf decision at the highest levels was taken to start the execution steps for a programme to support the financial stability of Bahrain,” the diplomatic source was quoted as saying.
Bahrain’s international bond prices and currency have come under pressure this year as the kingdom runs fiscal and current account deficits partly caused by low oil prices.
Saudi Arabia, Kuwait and the UAE, which are diplomatic allies of Bahrain, announced in June that they were in talks on a major aid package for the kingdom that would be linked to its progress in reforming its finances.
Sources in Bahrain told Reuters last month that the government planned to push reforms through parliament before Nov. 24 elections to the assembly. These include the imposition of value-added tax and changes to the pension system, Al Rai did not give details of the aid package. Sources previously told Reuters that it would extend over several years.
A $10 billion package would be worth about a quarter of Bahrain’s annual gross domestic product and 28 per cent of public debt, and cover over two years of state budget deficits according to International Monetary Fund projections.
Saudi Arabia, Kuwait and the United Arab Emirates have placed over $1 billion in deposits at the Central Bank of Jordan and committed $500 million in budget support over five years as part of a $2.5 bln package to shore up the kingdom’s struggling economy, a Jordanian government source said.
The source said a signing agreement will take place later on Thursday that announces the breakdown of a $2.5 billion aid package pledged last June to help Jordan implement austerity measures which had sparked massive protests.
The package also includes $600 million in credit guarantees by the three Gulf countries that will help Jordan secure cheap World Bank credit and other financing for much needed infrastructure projects.