UAE and Bahrain sign nearly $6bn currency swap deal

The central banks of the UAE and Bahrain have signed a currency swap agreement to promote the use of local money for cross-border trade and investment.

The five-year swap deal has a nominal value of AED20 billion, or BHD2 billion ($5.5 billion), the UAE state-run Wam news agency reported.

Khaled Mohamed Balama, governor of the Emirati central bank, said the agreement aims to expand financial and monetary cooperation, as well as strengthen trade and investment ties between the Gulf states.

He said the deal will promote the use of local currencies and advance cooperation among central banks, thereby driving financial stability and deepening regional and international partnerships.

In practice, it means that if Bahrain’s banks need UAE dirhams, the UAE central bank can provide the money directly, bypassing volatile market funding. It will also help reduce dependence on the US dollar for bilateral transactions.

The UAE is among the top three investors in Bahrain. Its cumulative direct investment of AED16.5 billion up to 2024 represented 10 percent of direct foreign inflows to Bahrain, the state-run Abu Dhabi Media Office said in a report.

The two Gulf states signed an income tax treaty in 2024, which came into effect in May 2025, to prevent tax evasion and encourage bilateral investment.

The central banks of the UAE and Turkey signed a $4.9 billion currency swap deal in October 2025.

In November 2023, the UAE and China renewed their $4.9 billion currency swap agreement for five years, followed by the signing of a $1.4 billion local-currency swap deal by the Emirates and Egypt.

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