Chapter Four Chapter Four External Value of the Currency Foreign Reserve and Foreign Exchange Operations
Article 27
(a) The parity rate of the Bahraini dinar shall be 1.86621 grams of pure gold. The Amir may, at any time, on the recommendation of both the Minister of Finance and the Agency and with due regard to the obligations of the State of Bahrain under any international monetary agreement it may have signed or acceded to, declare a different parity rate or external value for the dinar, as well as change the parity rate of the dinar in relation to gold, to the special drawing right units, to a convertible currency, or to any recognized standards international unit of currency. Such a parity rate shall be taken as basis for foreign exchange operations in the State of Bahrain. Change in the parity rate or external value of the dinar, and any ensuing change, shall be published in the Official Gazette and in other appropriate means of publicity.(b) The Agency shall, as a means of maintaining the parity rate or any other external value of the dinar referred to in paragraph (a), buy and sell gold or convertible currencies, through the operations authorized in Article (30) for the purpose of clearing foreign transactions.(c) The Agency shall from time to time set and publish the prices and other terms and conditions it will adopt in the currency and gold purchase and sale operations referred to in paragraph (b).Article 28
The Agency shall, upon terms and conditions to be set by the Agency's Board of Directors, maintain a foreign reserve composed of all or any of the following assets:
(a) Gold coins and bullion.(b) Foreign currency in the form of convertible currencies or balances in foreign banks in convertible currencies.(c) Any internationally recognized assets which include:1 — The gold part of the State of Bahrain's share in the International Monetary Fund.2 — The special drawing rights allocated to the State of Bahrain in the International Monetary Fund.(d) Bills of exchange and promissory notes payable outside the State of Bahrain in convertible currencies.(e) Treasury notes issued by foreign governments and payable in convertible currencies.(f) Such bonds as the Agency's Board of Directors shall from time to time determine, that are payable in convertible currencies and issued or guaranteed by foreign governments or international financial institutions, provided that such bonds shall mature within fifteen years from the date of their acquisition.(g) Such other bonds as the Agency's Board of Directors shall from time to time determine, that are issued by a foreign person and fulfil the following conditions:1 — Be negotiable in international financial markets.2 — Be payable in convertible currencies.3 — Mature within ten years from the date of acquisition by the Agency.Article 29
The amount of the foreign reserve to be permanently maintained by the Agency shall not be less than one hundred percent of the value of the currency in circulation. However, in exceptional circumstances, this minimum foreign reserve may be changed by virtue of a Decision of the Council of Ministers, but it will under no circumstances be less than 75% of the value of the currency in circulation.
Article 30
(a) Buy, sell and deal in gold coins and bullion.(b) Buy, sell and deal in foreign currencies, using for this purpose the means usually adopted in banking operations.(c) Buy, sell and deal in treasury notes and other bonds referred to in Article (28).(d) Open and maintain accounts abroad.(e) Open and maintain accounts, and act as agent or correspondent for foreign central banks or similar institutions and for foreign governments and their agencies, as well as for international financial institutions.Article 31
In carrying out the operations mentioned in Article (30) the Agency may deal only with banks located in the State of Bahrain, with the Government and its agencies and organization, public authorities, foreign central banks or similar institutions and other foreign banks and governments and their organizations, and with international financial institutions. However, the Agency may, with the prior approval of the Minister of Finance, deal with other persons upon such terms and conditions as the Agency's Board, of Directors may deem fit.
Article 32
(a) All profits resulting from the re-evaluation of the Agency's assets or commitments in gold or foreign currencies as a result of any change in the parity rate or external rate of the currency of the State of Bahrain, as well as the profits resulting from a change in the value, parity rate or rate of exchange of such assets or liabilities in relation to the currency of the State of Bahrain, shall be entered in a special account to be entitled "RE- EVALUATION RESERVE". Profits and losses resulting from such changes may not be included in the annual profit and loss account of the Agency. Losses resulting from such a change shall be deducted from the credit balance of the "RE-EVALUATION RESERVE" account. If the credit balance of this account is insufficient to cover this loss and notwithstanding any other provision of this law, the government shall issue bonds in favour of the Agency for the value of the deficit, and such bonds shall not be negotiable and shall be interest-free.(b) In case the "Re-evaluation Reserve" account shows a credit balance, the Agency shall at the end of each financial year begin by redeeming on behalf of the Government the bonds issued under the provisions of paragraph (a) of this Article and of Article (17) paragraph (b).
If the balance remaining after such redemption exceeds five percent of the value of the accrued liabilities of the Agency pertaining to the currency issue account, the Agency shall pay the excess to the Government. In case such remaining balance is not in excess of five percent of the value of these liabilities, no payment shall be made to the Government.(c) No entry shall be made to the debit or credit of the "Re-Evaluation Reserve" account, except as prescribed in this Article.
