LONDON : Bahrain has not drawn on its $5.3 billion currency swap agreement with the United Arab Emirates despite mounting economic pressures from the conflict with Iran, the country’s sustainable development minister told Reuters, adding that discussions were also under way about reinstating its Formula One Grand Prix later this year.
Bahrain has been among the Gulf economies hardest hit by the regional conflict, which erupted as the kingdom was attempting to reduce one of the region’s heaviest debt burdens.
Renewed Iranian attacks over the past two days have added to those challenges.
S&P Global estimates the conflict will push Bahrain’s economy into a 3% contraction this year while widening the fiscal deficit to nearly 8.5% of gross domestic product.
“What has happened is unfortunate, not what we planned for,” Minister of Sustainable Development and Bahrain Economic Development Board chief executive Noor bint Ali Alkhulaif told Reuters in an interview.
“It was meant to be a year of building the new Bahrain.”
Alkhulaif said the country’s recovery remained on track despite the setbacks.
She said major manufacturing and logistics companies had found alternative shipping routes to bypass disruption in the Strait of Hormuz, while tourist arrivals from neighbouring Gulf countries had largely returned to pre-conflict levels.
Regional visitors accounted for around 90% of Bahrain’s 15 million tourists last year.
Despite concerns over declining foreign exchange reserves, which have fallen to around $3 billion, their lowest level since the COVID-19 pandemic, Bahrain has not used the currency swap agreed with the UAE in April.
“Based on the information I have, it was not exercised,” Alkhulaif said, adding that she also serves on the board of Bahrain’s central bank.
Alkhulaif also confirmed that discussions were continuing over the possible return of the Bahrain Grand Prix to the Formula One calendar after the race, along with the Saudi Arabian Grand Prix, was cancelled in March because of the conflict.
“There is the talks about maybe plugging in some of the races that were cancelled back into the calendar,” she said.
“No confirmation still on that, (but) potentially.”
Formula One sources say the most likely slot for a rescheduled Bahrain Grand Prix would be the weekend of Oct. 3-4, between the Azerbaijan Grand Prix and the Singapore Grand Prix, although any decision will depend on an easing of regional tensions.
A restored race would provide an economic boost, with the Bahrain Grand Prix typically attracting about 105,000 spectators, including a significant number of high-spending international visitors.
Alkhulaif also said Bahrain was well placed to regain its traditional position as the opening race of the 2026 Formula One season and host pre-season testing, although that would also depend on the regional security situation.
