Bahrain, which is one of the most heavily indebted among the oil producers of the Middle East, will put $2 into the Future Generations Reserve Fund for each barrel of crude sold at over $80, according to a statement.
The country will set aside $1 when oil is over $40, and pay $3 if it exceeds $120, Bloomberg reported.
With this, Bahrain will resume making payments into its rainy day fund as it looks to rebuild savings tapped to handle the economic impact of the Covid-19 pandemic.
Bahrain had halted payments into its reserve fund in 2020, and drew down $450 million, almost half its assets, when the coronavirus pandemic shut down economies around the world and briefly sent oil prices crashing.
Global benchmark Brent has mostly traded above $100 since the Russia-Ukraine conflict began in late February.
In a stark turnaround from two years ago, soaring crude prices are transforming the fortunes of the petro-states in the Gulf, generating a windfall that’s now allowing the region’s most vulnerable economies to rebuild finances, pay down debt, and raise spending.
Even the biggest producers such as Saudi Arabia, which is set to record its first budget surplus in about a decade this year, are capitalising on the boom times to add to its foreign assets and boost investment through its sovereign wealth funds.
Bahrain received a $10 billion financial aid package in 2018 to help it cope with high debt levels and budget deficits.
As part of the financial support from richer neighboring nations including Saudi Arabia, the country outlined plans to balance its budget by 2022.
However, last year it pushed back that target because of the impact of the coronavirus pandemic on its economy.
Since then, soaring oil prices and an economic rebound have led Bahrain’s Finance Minister Sheikh Salman bin Khalifa Al Khalifa to say the country could now beat the 2024 goal.
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