Bahrain is facing financial doldrums that seem insurmountable, and now a lower oil price market is making things worse.
But with Saudi women finally behind the wheel as of this Sunday, June 24, Bahrain will find itself benefitting from the traffic being driven its way.
However, it’s fintech that holds the most economic promise as blockchain and crypto make strong headway into the country.
Debt and buried
The cost of insuring Bahrain’s sovereign debt against default is alarmingly high as the country’s struggles to tap international markets to avoid a potential financial crisis, according to Reuters
Bahrain’s credit default swaps (CDS) went up to 413 basis points last week, surpassing previous peaks of 412 basis points in February 2016, when oil prices were at around $30 per barrel.
In a CDS, the buyer of the swap makes payments to the swap’s seller up until the maturity date of a contract. In return, the seller agrees that in the event that the debt issuer defaults or experiences another credit event, the seller will pay the buyer the security’s premium as well as all interest payments, according to Investopedia.
“A decline in oil prices over the past few weeks, from around $80 per barrel in mid-May to $74 on Tuesday, has lifted the CDS of Saudi Arabia and Qatar by 7 bps and 10 bps, respectively, while Bahrain’s CDS soared 82 points since mid-May,” said Reuters.
Help from some friends
Bahrain is not as able to deal with adversity than its wealthier Gulf neighbors given its large budget deficit and declines in foreign reserves.
The International Monetary Fund (IMF) puts Bahrain’s state budget deficit at 11.6% of GDP in 2018 reaching $1.2 billion.
According to a research note by Jean-Michel Saliba, MENA economist at Bank of America Merril Lynch, Bahrain received unofficial financial support last April thanks to a $500 million bond and a $2.8 billion deposit in retail banks.
Manama was forced to drop plans early 2018 for a conventional dollar-denominated bond issue because of the high yields demanded by investors.
Women driving traffic
Women from Saudi Arabia will be able to drive cars and cross into neighboring Bahrain by car without men on June 24, when the permission to drive cars for Saudi women officially comes into force, Saudi Ambassador to Bahrain Abdullah bin Abdulmalik Al-Sheikh said.
“Saudi women have the right to independently cross by car into Bahrain via King Fahd Causeway on June 24, and Bahraini women can come by car to Saudi Arabia and drive across its territory without being unaccompanied by men starting from next Sunday,” Abdulmalik Al-Sheikh told Akhbar al-Khalidj newspaper in an interview.
Many Bahrainis love shopping in Dammam since goods are comparatively cheap in the neighboring Kingdom, according to the Bahrain Daily Tribune.
Speaking to Bahrain Daily Tribune, Bahraini Yasmine Ahmed said, “I am thrilled to go to Saudi driving my car. Now we women can go and shop with friends and family members.” “We won’t be bothering men anymore to go to Saudi,” she said.
But Saudi Women can also have the freedom to cross, shop and do some tourism around the neighboring kingdom, which could prove to be a windfall for Bahrain.
Crypto and Blockchain
According to Bitcoin.com, a Dubai-based cryptocurrency exchange named Palmex has reportedly become the first crypto exchange in the Middle East and North Africa (MENA) region to receive a regulatory sandbox license by the Central Bank of Bahrain (CBB), effective July 15.
The Dubai International Financial Center (CPI Financial) elaborated on Tuesday saying: “Palmex, a professional digital asset exchange powered by Arabianchain Technology, has become the first cryptocurrency exchange in the Middle East and North Africa (MENA) to receive a regulatory sandbox license.”
The exchange offers “multiple trading pairs including bitcoin and Dubaicoin DBIX, the first decentralized cryptocurrency in the region,” in addition to ETH, LTC, and XRP. Fees are divided into three tiers based on monthly trading volume.
The sandbox creates a virtual safe space for businesses to “trial and refine innovative products, services, platforms and business models in a live but controlled environment…giving regulators time to adapt legislation as needed,” CPI Financial explained. “Companies will also be able to apply to list their tokens and coins with Palmex and benefit from the compliance of the exchange.”
Adoption of blockchain is seen as a big opportunity to grow the tech economy in the Middle East, according to Forbes.
The Emirates Blockchain Strategy aims to save $3 billion spent annually in the country on document transactions and documents. Also, a Dubai-based blockchain start-up, ArabianChain recently launched a new digital asset exchange that is designed to make it possible for investors to safely buy, sell, and trade various cryptocurrencies online.
Outside of the UAE, The Bahrain Economic Development Board (EDB) and FinTech Consortium recently announced the launch of Bahrain FinTech Bay, among the largest dedicated financial technology (fintech) hubs in the Middle East and Africa.
Bahrain’s goal is to become the fintech destination and is aggressively spearheading the way for blockchain and cryptocurrencies use.