Bahrain has announced a significant economic support package to insulate its financial sector and wider economy from the impact of the ongoing US-Israeli war with Iran. The intervention, directed by Crown Prince and Prime Minister Salman bin Hamad Al Khalifa, focuses on boosting liquidity for banks and providing immediate relief for businesses and individuals.
Quick Facts
- BHD 7 billion ($18.6 billion) in liquidity support.
- Three-month loan and credit card payment deferrals.
- Banking reserve requirements cut from 5% to 3.5%.
Inside The Financial Shield
The Central Bank of Bahrain is implementing a sweeping set of measures to maintain stability. Retail lenders and financing companies will now permit both individuals and corporates to defer loan installments and credit card payments for three months, covering both principal and interest.
To inject cash directly into the system, the central bank is offering unlimited dinar funding to retail banks against eligible collateral for six months. It has also extended its repo facility to three months.
Further easing pressure on bank balance sheets, regulators have relaxed key capital requirements. The minimum liquidity coverage ratio and net stable funding ratio have both been lowered from 100% to 80%, a move designed to free up capital and encourage continued lending. Banks will also be given more flexibility in how they classify loans affected by the economic uncertainty.
A Proactive Move Amid Fiscal Pressures
The intervention comes as Bahrain navigates a challenging fiscal environment. While the non-oil sector drove GDP growth of 3.5% in 2025, the country entered the conflict with limited financial buffers.
According to a January report from the International Monetary Fund, Bahrain’s fiscal deficit hit 11% of GDP in 2024, with public debt climbing to 134%. Justin Alexander, director at Khalij Economics, noted that foreign exchange reserves stood at $4.7 billion, covering less than three months of imports.
The kingdom’s high fiscal break-even oil price, estimated at around $125 per barrel, adds another layer of vulnerability. With interest payments already consuming about a third of government revenue, the support package is a critical move to cushion businesses and households from the immediate economic shock.
About The Central Bank of Bahrain
The Central Bank of Bahrain (CBB) is the single integrated regulator of Bahrain’s financial industry. It was established in 2006 and is responsible for maintaining monetary and financial stability in the kingdom. Its mandate includes implementing monetary policy, regulating the financial sector, and managing the country’s foreign exchange reserves.
Source: AGBI
