Moody's credit ratings agency said Bahrain would need to attract additional capital this year, including by borrowing to maintain its currency peg after a massive drop in foreign currency reserves due to lower oil prices.
Central bank data shows that the foreign exchange reserves in Bahrain decreased by more than half between February and the previous March, then fell to 290 million Bahraini dinars ($ 768.82 million) last April. Bahrain is one of the financially weakest countries in the Gulf region.
Moody's said this was the lowest level of reserves since 1990.
The reserves returned to rise last May and recorded $ 1.8 billion after Bahrain issued two billion dollars worth of bonds.
Moody's added in a note that "the steep drop of nearly $ 2.7 billion (or 78%) between February and April highlights the exceptional rise in risks for external vulnerabilities of Bahrain, given that the long-running linkage rate has not been supported by Only a very thin source of foreign currency. "
Bahrain maintains an exchange rate pegged at 0.376 Bahraini dinars to the dollar.
Moody's said the current account deficit could widen to nearly $ 2 billion between June and December of this year.
"Bahrain's ability to attract more net capital inflows this year (including external government borrowing) will be necessary to maintain the currency peg and avoid depleting reserves," she added.
Bankers and analysts said Bahrain might need more financial help from other Gulf states soon, possibly this year.
Bahrain is ranked at a high level of risk by the major credit rating agencies.
In 2018, Bahrain, a small oil producer, received a $ 10 billion aid package over five years from Saudi Arabia, Kuwait and the UAE to help it avert a credit crisis.