Bahrain, UAE Central Banks declare Currency Swap Accord.
The Central Bank of Bahrain (CBB) and the Central Bank of the UAE (CBUAE) have declared a significant currency swap deal of AED 20 billion (BHD 2 billion). The contract will last five years and is already being regarded as a giant leap to a greater financial cooperation within the Gulf.
The move will help to stabilize trade, investment and banking between Bahrain and the UAE as well as decreasing reliance on foreign exchange markets.
What Is the Currency Swap Agreement?
A currency swap agreement enables two central banks to directly exchange their domestic currencies whenever they want. In this case:
UAE can access Bahraini dinars
Bahrain can access UAE dirhams
Total value: AED 20 billion/ BHD 2 billion.
Duration: 5 years
The signature was made in a virtual ceremony.
This system assists both nations to exchange cross-border payments smoother without converting them using the US dollar.
The Deal has several advantages.
According to officials, the agreement will have numerous benefits on both economies.
Main advantages include:
Reduced business transaction costs.
Reduced exchange-rate risk
Faster trade settlements
Better liquidity support of banks.
Increased use of local currencies.
Increased financial integration in the region.
This comes in handy particularly with companies that engage in import-export, logistics, banking as well as investment projects in the Gulf region.
