Bahrain hired investment bank Lazard Ltd. to advise on how to repair its strained public finances, according to people with knowledge of the matter, as the island kingdom seeks to secure crucial support from rich neighbors to avoid a currency devaluation.
Lazard is helping Bahrain evaluate fiscal reforms to help ease pressure on the state’s budget, the people said, asking not to be identified because the details aren’t public. The options include raising capital from international markets, one of the people said. Bahrain’s Eurobonds dropped after the report.
Lazard declined to comment. Bahraini officials didn’t immediately respond to requests for comment.
Bahrain, one of the most vulnerable Gulf Arab economies to lower oil prices, confirmed last week that it was in talks with Saudi Arabia, the United Arab Emirates and Kuwait for support that would help reduce ballooning debt and shore up foreign-exchange reserves. Bloomberg News reported last year that the three countries had asked authorities to do more to bring finances under control before receiving aid.
Doubts over whether the Gulf countries would come to the rescue battered Bahraini assets last month, raising the kingdom’s credit risk by the most on record. Without the aid, investors had feared that policy makers would be forced to abandon the dinar peg to the dollar, raising questions about the ability of other Gulf nations to sustain their own currency policies.