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Can Bahrain be saved from a “terminal decline”?

Bahrain is in deep financial trouble, but there is good news.

Bloomberg reports that Bahrain and its Gulf Arab allies are said to be making progress on an aid program to help the island kingdom repair its finances and avoid a devaluation that could damage neighboring markets.

“Officials from Bahrain, Saudi Arabia, the UAE and Kuwait are discussing a multi-year program that would involve spending cuts and measures to increase non-oil revenue, including the introduction of a value-added tax,” according to five people with knowledge of the matter telling Bloomberg.

Related: Bahrain is warned: Reform or sink

What’s at stake?

Bahrain’s economy is the smallest among the six members of the oil-rich Gulf Cooperation Council and is in danger of abandoning the dinar peg to the dollar, triggering speculation that its neighbors would follow suit.

Bahrain officials have repeatedly said they have enough reserves to maintain the peg.

The kingdom and its allies announced in June they were in talks over aid, but a slow response from Bahrain on reforms it needed doing stalled aid talks, according to a July 18 Bloomberg report.

Bahrain on Monday stood with Saudi which is embroiled in a political standoff with Canada over what Saudi now calls “Ottawa’s interference in Riyadh’s internal affairs”, Reuters reports.

Saudi said on Sunday it would suspend new trade and investment with Canada after the foreign ministry in Ottawa urged Riyadh to release arrested civil rights activists

“The Kingdom of Bahrain affirms its full solidarity with the Kingdom of Saudi Arabia …against anyone attempting to undermine its sovereignty,” the Bahraini foreign ministry on Twitter.

Read: Bahrain hotel sector going through a rough time, ME not much better

More good news

Bahrain saw strong growth in its tender opportunities in the past 12 months, according to the 2017 annual report released by the country’s Tender Board.

The total number of opened tenders reached 1,091 in 2017, up by 9.2 percent on the previous year. In response, 5,208 bids were submitted, to which 1,892 tenders were awarded worth $9.9 billion, up 1565 on 2016.

Read: Will Bahrain be the next technology hub in GCC?

Storm ready to unleash

Breaking says Bahrain’s government as being “slow” to implement policy changes and attract foreign investment after oil prices fell in recent years.

The International Monetary Fund’s (IMF) executive board recommended on July 15 that Bahrain institute direct taxation (including corporate income taxes), contain the public wages, and focus subsidies on the poorest citizens.

“On July 20, Middle East Economic Survey described the island’s financial sector—once the region’s banking center—as being ‘in terminal decline’, said Breaking

“Meanwhile, a hoped-for boost in Bahrain’s relatively minuscule oil reserves has been slow, with production from a recently discovered but difficult-to-exploit offshore field not expected until 2023.”

Related: Bahrain sitting on billions of dollars it didn’t know existed