The net foreign assets of the central bank and retail banks sank to minus BHD 526.1 million in May, the lowest level on record
The Central Bank of Bahrain’s (CBB) net foreign assets fell in May, a development that may fuel concern about the country's ability to defend its currency against a current account deficit and rising public debt, Reuters reports.
The assets dropped to BHD 671.1 million ($1.78 billion) from BHD 779.4 million in April and net foreign assets at Bahraini retail banks also fell to minus BHD 1.20 billion from minus BHD 1.17 billion meaning liabilities exceeded assets.
Bankers say the central bank sometimes uses swap agreements or other deals to obtain foreign currency as needed from retail banks, bolstering its reserves. The simultaneous fall of both sources of foreign currency suggests that strategy may become increasingly difficult.
Sunday's data showed the central bank's net foreign assets were equivalent to about 40 days' worth of imports, some economists believe a safe level of reserves for emerging economies is around 90 days. Bahrain also has investments abroad which it might liquidate if it needed hard currency, reported Reuters.
Bahrain's dinar, pegged at 0.37608 to the US dollar, slipped to a 17-year low last week as hedge funds dumped its global bonds because of jitters about Manama's public debt, which jumped to 89 per cent of gross domestic product last year.