(Reuters) – Bahrain will receive up to $2 billion from its Gulf neighbors before the end of the year as the first installment of an aid package, and some funds have already arrived in state coffers, officials said on Thursday.
Last week, Saudi Arabia, the United Arab Emirates and Kuwait offered a $10 billion aid package over five years (2018-2022) to avoid the risk of a debt crisis in the island kingdom, in a deal tied to fiscal reforms.
Bahrain’s finances have been hit hard by a slump in oil prices in 2014 and the small country has been struggling to cut government spending while avoiding public anger over austerity measures.
Two officials, who declined to be named, said $2 billion would arrive before the end of the year and would figure in the 2019 budget. Another $2 billion, due by the end of 2019, may also be reflected in the budget, one official added.
Bahrain released a 33-page fiscal plan last week after signing the agreement with its Gulf neighbors to fix its debt-burdened finances and abolish its budget deficit by 2022. Manama had projected a $3.5 billion budget deficit in 2018.
A government spokesperson confirmed that Bahrain has received some funds as part of the aid package, but declined to give details.
The support from other Gulf powers came after investors started doubting Manama’s ability to pay back its debt and asked for higher returns, which prompted the government to cancel a bond sale in March.