MANAMA, 8 January 2008 — Bahrain’s fixed exchange rate policy has led to a “high degree of economic and price stability,” said the country’s central bank in a report.
Bahrain’s central bank said its currency peg to the US dollar has helped the Island develop a financial services sector that has surpassed oil as the largest contributor to economic growth.
The financial services industry contributed 25.5 percent to GDP in 2006 at BD4.1 billion, the central bank said in a study on the banking sector’s growth in 2007. The kingdom’s financial services industry has surpassed the oil sector as the largest contributor to the national GDP,” it said.
Total bank assets were $233.2 billion at the end of October, up 33 percent from a year earlier, the central bank said, adding that assets of Islamic lenders jumped 85 percent over the same period to $18.8 billion, it added.
Bahrain’s government said on Sunday it was looking into ways to ease the impact on citizens from a rise in the cost of living in the Gulf Arab kingdom, which it said reflected global surges in prices of basic goods.
“The cabinet reviewed a number of solutions and options through which citizens can be spared the impact of the global increase of prices which cast its shadow on the local market,” the official Bahrain News Agency (BNA) reported.
“The cabinet decided to ask the ministerial financial and economic affairs committee to hold an extraordinary meeting yesterday to study the solutions debated by the cabinet.”
Although inflation in the island state was the lowest in the Arab side of the Gulf in 2007, it hit Bahrainis harder due to relatively lower wages.
Inflation in Bahrain would ease to 3.1 percent in 2008 from 3.2 percent in 2007, according to a Reuters poll in December.
Stock Market Trading Hours
Bahrain said it will extend stock market trading hours by one hour to three hours from Sunday to boost activity.
The market will open at 0630 GMT, rather than 0700, and close at 0930 rather than 0900, the exchange said on its website.
“We hope that extending the trading session to three hours will contribute to increasing the trading activity at the exchange,” Fouad Rashid, director of the Bahrain Stock Exchange is quoted as saying in the statement.
Bahrain’s main index rose 24.3 percent last year, the least among the seven Gulf Arab indexes. It is lagging so far this year, up less than 1 percent.
Gulf Arab rulers decided to keep their countries’ currencies pegged to the weak US dollar in a summit in December after expectations that they would ditch the peg to ease inflationary pressure in their countries.
The speaker of Bahrain’s parliament proposed in December that the government sever the dinar currency link to the dollar and track a currency basket instead.
