Saudi Arabia, Kuwait, and UAE have signed on October 4 a financial support agreement worth USD 10 bn with Bahrain to aid the country’s funding requirements as it embarks on a fiscal program aimed at eliminating its budget deficit by 2022, state-run Bahrain News Agency (BNA) reports.

The agreement is in coordination with the Arab Monetary Fund (AMF) as an advisory body, BNA added.

The deal comes after Bahrain had been facing the specter of defaulting on a USD 750 mn Islamic bond repayment due on November 22. In addition, the International Monetary Fund (IMF) in late May warned that the country’s public debt represents 89% of its GDP.

As part of the bailout, Bahrain pledged to eliminate the country’s debt by 2022, aiming to restructure its finances to save USD 2.1 bn annually. The savings will come in part via budget cuts, voluntary retirement of government employees, and “streamlining the distribution of cash subsidies,” according to BNA.

“Our fiscal balance program, combined with the financial support agreement from Saudi Arabia, UAE, and Kuwait, allows for a swift and achievable consolidation program that balances fiscal sustainability with continued economic growth and prosperity,” Bahrain’s Deputy Prime Minister Sheikh Khalid bin Abdulla Al Khalifa was quoted as saying by BNA.

“With spending reductions commencing in the short term and the target of eliminating the budget deficit by 2022, the program secures the foundations of an economy that affords even more opportunity, more jobs, and greater living standards for the kingdom’s generations of today and tomorrow,” he noted.