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Bahrain & Oman: austerity and Gulf help needed

The rally in oil prices has opened the door for some of the larger Gulf economies to loosen fiscal policy, but governments in Bahrain and Oman will need to continue tightening to repair their dire balance sheets. Even with further fiscal consolidation, we think that both countries will need to turn back to the rest of the Gulf for further financial support to help service their large external debts and keep dollar pegs intact.

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