Bahrain hard currency assets rise $800mln in June, still modest – HSBC

Bahrain hard currency assets rise $800mln in June, still modest – HSBC

Bahrain's central bank foreign currency assets rose by almost $800 million in June from May, recovering further from pandemic lows but still modest for an oil-led economy with a currency pegged to the dollar, HSBC said on Thursday.

"However, the rise means that reserves have risen 50% in the space of a year to their highest level since Q4 2015, continuing the recovery from COVID-19-era lows when holdings fell to just USD770m," Simon Williams, HSBC chief economist for Central and Eastern Europe, Middle East and Africa, said in a research note.

It was the third consecutive month-on-month rise in foreign currency assets, to 1.95 billion dinars ($5.17 billion), he said.

"Subsequent to the June data, Bahrain repaid a USD1.5bn Eurobond which could have required the authorities to tap reserves, but Bloomberg data also show there was a USD1bn private placement that may have preserved liquidity," Williams said.

A small oil producer, Bahrain is one of the most heavily indebted of the hydrocarbon-rich Gulf Cooperation Council countries and is rated "junk" by credit rating agencies.

The rise in reserves reflects a strong current account performance, with eight straight quarterly surpluses notched since the second quarter of 2021 worth a cumulative $3.8 billion, or 8% of HSBC's