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Bahrain outlook improves on fiscal reforms, S&P says

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S&P Global Ratings has revised Bahrain’s outlook to ‘stable’ from ‘negative’ on the back of new fiscal reforms aimed at improving non-oil revenues and cutting state spending, the ratings agency said in a statement.

Rated below investment grade, Bahrain was bailed out to avoid a credit crunch in 2018 with a $10 billion package from wealthy neighbors, Saudi Arabia, Kuwait and the United Arab Emirates.

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That money was linked to a set of fiscal reforms, but after the coronavirus crisis strained its finances, Bahrain in September postponed plans to balance its budget by two years and announced plans to increase a value-added tax.

“The Bahraini government recently announced additional fiscal reforms to strengthen non-oil revenue and rationalize expenditure. These measures, along with the more supportive oil price environment, should improve the sovereign’s fiscal position,” S&P said in a statement this weekend.

The agency said it expects the government to benefit from additional financial support from its Gulf neighbors, if needed.

Bahrain will double value-added tax to 10 percent next year, a move which S&P estimated could contribute receipts of about 3 percent of gross domestic product in the next few years, up from about 1.7 percent this year.

The Gulf state is also planning to rationalize operational government expenditure and social subsidies in 2023 and 2024, a move which shifts the focus of its reforms more on the spending side than on raising non-oil revenues.

“We believe there is higher implementation risk in expenditure rationalization as the delicate political and social environment on the island, which has constrained the government’s efforts, persists,” S&P said.

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Iran gas flow to Turkey cut by technical failure: Officials

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Iran has cut gas flows to Turkey due to a technical failure, prompting Turkish authorities to order gas-fueled power plants to cut gas use by 40 percent, sector officials said on Thursday.

Turkish natural gas distributors were also asked to reduce supply to 60 percent for large consumers except for that used for heating, the Turkish sector officials said, adding that schools and hospitals will be exempted.

Iran notified Turkey of 10-day cut to natural gas flows, but talks are ongoing to start flows earlier, the officials added.

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Turkey, UAE sign FX swap deal worth $5 billion

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Turkey signed a $4.9 billion currency swap agreement with the UAE, boosting dwindling foreign-exchange reserves depleted by the country’s financial turmoil.

The three-year deal reflects a warming of ties that began last year after a decade of frosty relations that rippled across the Middle East. Turkey has already signed swap deals with Qatar, South Korea and China to prop up its reserves, which shrank more than 10 percent in December as the central bank intervened in the foreign-exchange market to stem the lira’s decline.

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Reserves totalled just under $110 billion on Jan. 7, according to official data, but fall significantly below zero when the central bank’s liabilities from swap deals with foreign counterparts or commercial lenders are stripped out. The lira, meanwhile, still lost about 40 percent of its value last month alone, when investors fled lira assets in search of protection against a worsening inflation outlook.

The run on the currency began after the central bank started a cycle of interest rate cuts in September at President Recep Tayyip Erdogan’s demand. Erdogan argues that lower borrowing costs will curb price pressures, contrary to what most central bankers think.

The size of Wednesday’s swap agreement in local currencies is 18 billion UAE dirhams or 64 billion Turkish liras, according to separate statements by both monetary authorities.

The deal followed a visit by Abu Dhabi’s Crown Prince, Sheikh Mohammed bin Zayed Al Nahyan, to Turkey in November.

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UAE energy minister looks ahead to supply 400,000 bpd, ‘not worried’ about short term

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UAE energy minister Suhail al-Mazrouei said on Wednesday that he was “not worried about the short term” when asked about predictions that oil prices will rise above $100.

The price of benchmark Brent crude gained 0.33 percent on Wednesday to $87.76 per barrel, as oil rose for a fourth day as an outage on a pipeline from Iraq to Turkey added to worries about an already tight supply outlook.

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“I will never give a prediction on a price. We will continue to do our work of increasing the supply of 400,000 bpd,” he told reporters on the sidelines of the Abu Dhabi Sustainability Week.

“I am not worried about the short term,” he said. “I am worried about the long term if there are voices saying we should not invest.”

Analysts are forecasting tight oil supply in 2022, driven in part by demand holding up much better than expected as the highly contagious omicron coronavirus variant spreads, with some predicting the return of $100 oil.

Mazrouei said all producing countries and international oil companies should invest in hydrocarbons to ensure a smooth energy transition.

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Key Iraq oil pipeline to restart after explosion in Turkey

Global oil demand expected to remain ‘robust’ despite COVID omicron variant: OPEC

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