The measure, ordered by Crown Prince and Prime Minister Salman bin Hamad Al Khalifa, will cover salaries of insured Bahraini workers through the Unemployment Insurance Fund, as part of a broader government response to protect employment and support small and medium-sized enterprises.

The Gulf state has faced direct and indirect economic pressure from the conflict, including damage to industrial facilities, disruptions to shipping through the Strait of Hormuz and a decline in tourism and exports. Bahrain hosts the U.S. Navy’s Fifth Fleet and has been exposed to regional security risks during the hostilities.

Central bank measures have complemented fiscal support, with authorities injecting liquidity, easing lending conditions and allowing temporary deferrals on loan and credit card payments for businesses and households.

The Central Bank of Bahrain has also made funding available to banks against collateral to maintain credit flows.Analysts say the wage-support scheme reflects a shift in labor policy from post-crisis compensation to preemptive job protection.

Economists note that preserving employer-employee relationships during short-term disruptions can reduce long-term unemployment risks and support faster recovery.“By temporarily covering wages, it gives companies breathing space during short-term disruptions and reduces the need for immediate layoffs,” said Anthony Hobeika, managing partner at MENA Research Partners.

The approach mirrors measures adopted across the Gulf during the COVID-19 pandemic, when governments used unemployment insurance systems to subsidize private-sector wages. Bahrain itself implemented a similar program in 2020, while Saudi Arabia provided partial wage support under its SANED scheme.

Despite signs of economic resilience, including 3.5% GDP growth in 2025 driven largely by non-oil sectors, Bahrain’s fiscal position remains constrained. Moody’s Investors Service recently revised the country’s outlook to negative, citing deteriorating credit metrics and risks linked to the ongoing conflict.

The war has compounded structural vulnerabilities, including high public debt levels and limited fiscal space. Bahrain’s debt stood at roughly 140% of GDP before the conflict, according to external estimates.Regional support has also emerged, with the United Arab Emirates agreeing to a five-year currency swap arrangement worth about $5.45 billion to bolster liquidity and financial cooperation.

Economists caution that while wage subsidies can be effective in cushioning short-term shocks, their success depends on being temporary and targeted to avoid distorting labor markets.

Policymakers are expected to balance immediate job protection with longer-term goals of productivity and economic diversification.

The agreed, subject to approval by the IMF’s executive board, would release about $1 billion under the Extended Fund Facility and an additional $210 million under the Resilience and Sustainability Facility, bringing total disbursements under the current program to $4.5 billion.

Under the broader $7 billion program, the Washington-based lender has urged Islamabad to maintain a tight and data-dependent monetary policy stance to anchor inflation expectations and reinforce foreign exchange buffers.

The IMF’s guidance comes as global energy prices rise and regional geopolitical tensions add uncertainty to Pakistan’s inflation outlook, particularly given its reliance on imports.

Pakistan’s central bank has held its benchmark policy rate steady at 10.5% this month, pausing an easing cycle as authorities weigh the risks of renewed price pressures against the need to support economic stability.

The staff-level agreement marks a critical procedural step in unlocking further funding, which analysts say remains essential for sustaining macroeconomic stability and meeting external financing needs.

The MSCI global equity index posted modest gains, reflecting confidence in a soft-landing scenario for major economies.
Meanwhile, U.S. Treasury yields slipped, suggesting that investors anticipate easier financial conditions in the months ahead.

In New York, the Dow Jones Industrial Average rose steadily, buoyed by strength in value stocks and renewed market breadth.
While technology shares saw mild selling, cyclical sectors such as finance and energy led the rally, signaling broader investor participation.

Market analysts said the easing of bond yields underscored rising optimism about inflation moderation and potential policy support.
The yield on 10-year U.S. Treasury notes dropped to around 4.06%, marking a notable decline that reflects improving market sentiment.

European stocks joined the global rally, with both the STOXX 600 and FTSEurofirst 300 hitting record highs.
Banking and industrial shares led gains as investors positioned for stable growth and steady borrowing conditions.

The improved outlook also comes as U.S. lawmakers prepare to vote on a bipartisan agreement to reopen government agencies.
The resolution of the longest shutdown in U.S. history is expected to restore economic clarity and resume crucial data releases.

In currency markets, the dollar strengthened slightly against the yen, while the Japanese currency hovered near nine-month lows.
Officials in Tokyo reaffirmed their commitment to monitoring exchange rates, ensuring stability amid changing global dynamics.

Analysts noted that the gradual return of risk appetite is fueling optimism across global markets.
Many expect further recovery in equity performance as interest rate cuts and fiscal stability provide a supportive backdrop.

Federal Reserve officials have also signaled a potential shift toward accommodative measures to sustain economic growth.
Comments from New York Fed President John Williams hinted at the possibility of restarting bond purchases to manage short-term rates effectively.

The market also reacted to news of Atlanta Fed President Raphael Bostic’s planned retirement in early 2026.
Analysts believe his replacement could lean toward dovish policies, aligning with the White House’s preference for lower borrowing costs.

Investors are also watching the technology sector closely as spending on artificial intelligence continues to drive corporate strategy.
Despite short-term volatility, sentiment remains positive for AI-related investments and innovation-driven growth.

Global equity strategists highlighted that the market’s resilience reflects confidence in central bank coordination and policy clarity.
With inflation easing and liquidity improving, the conditions appear favorable for continued equity inflows.

Market participants are also encouraged by renewed corporate earnings momentum, especially in financial and industrial sectors.
This shift toward value-oriented strategies underscores expectations of long-term economic expansion.

As the Fed’s next policy meeting approaches, analysts predict a measured approach that balances growth with inflation management.
Investors remain focused on data-driven decisions and the gradual normalization of global financial markets.

Overall, the decline in U.S. bond yields and the steady rise in global stocks signal renewed optimism in the global economy.
With improving fiscal coordination, easing inflation pressures, and strong corporate resilience, markets are positioned for sustained progress in 2026.

Lebanon has also lifted banking secrecy on the accounts of all five individuals, which include Salameh, his brother Raja, his son Nady, his former assistant Marianne Hoayek and Anna Kosakova, with whom Riad has a daughter, the statement said.

Salameh served as central bank governor in Lebanon from 1993 until July 31. He faces arrest warrants in France and Germany following investigations into whether he and his brother took $330 million in public funds from the Lebanese central bank while he was governor.

The brothers and Hoayek have all been charged in Lebanon over embezzlement and other financial crimes.

The Salameh brothers deny the charges. Nady Salameh has not responded to Reuters requests for comment. Lawyers for Hoayek and Kosakova have also not responded to Reuters requests for comment.

Salameh, in messages to Reuters, denied the allegations made by the three sanctioning countries and said he would challenge them. Some of his assets had already been frozen in previous investigations, he said.

In March 2022, the European Union’s criminal justice cooperation organization announced the freezing of some 120 million euros($130 million) of Lebanese assets in France, Germany, Luxembourg, Monaco and Belgium, in a case in which Munich prosecutors said Salameh was a suspect.

In July, the French judiciary transferred seized assets belonging to Salameh and his associates to the Lebanese state.

According to Lebanese law, the Special Investigation Commission is headed by the central bank governor. In the absence of an appointed successor for Salameh, first vice governor Wassim Mansouri heads the institution as acting governor. Monday’s statement was signed by Mansouri.

Weerasinghe said he would like to see private sector interest rates come down further and at a faster pace, adding that the domestic debt restructuring is the most important focus for the debt-laden country in the near-term.

“We would firstly like to see yields drop in line with policy rates and, from there, decline further. We are waiting to see this reaction from markets,” he said.

“Given the downward inflation trajectory we see room to further loosen policy rates.”

Hit by a severe foreign exchange shortage last year, Sri Lanka’s economy crumpled, pushing the central bank to raise interest rates to record levels to counter rampant inflation and currency pressure.

The country secured a $2.9 billion rescue package from the International Monetary Fund (IMF) in March.

In the last two months Sri Lanka has slashed policy rates by 450 basis points, signalling a focus on growth after the crisis-hit economy contracted by 7.8% last year.

Sri Lanka is on track to post a stronger performance this year than the 3% contraction projected by the IMF, Weerasinghe said.

“Sri Lanka has managed to do better than expected before and we are hopeful that Sri Lanka will once again perform better than the projections.”

Over the past five months Sri Lanka’s economy has stabilised with inflation dwindling to 6.3% in July, from a high of 69% last September, and on track to hit the central bank’s target band of 4%-6%.

Sri Lanka’s economic stability is also dependent on the upcoming budget, which is likely to be presented to parliament in November.

“Sri Lanka has to ensure that fiscal consolidation and other measures outlined in the IMF program are taken forward in a strong budget. That is very important for Sri Lanka’s recovery to be sustainable,” Weerasinghe said.

Governor Jameel Ahmad told a press conference that the inflation outlook for the next fiscal year was between 20% and 22%, in line with government projections and that Pakistan’s deal with the International Monetary Fund (IMF) had not necessarily required a further rate hike.

“The IMF did not say anywhere that we have to increase rates,” Ahmad said. “They said the policy stance should be aggressive and we will go forward with an aggressive policy stance.”

The monetary policy committee meeting was the first since a new $3 billion bailout was approved by the IMF earlier this month for the ailing economy that had been teetering on the brink of a global debt default.

“The State Bank of Pakistan is comfortable that developments in the last few weeks will help stabilise the economy and, in spite of higher energy prices, inflation will come down,” said Mohammed Sohail, chief of Karachi-based investment house Topline Securities.

Ahmad said Pakistan was on “on course” to meet the medium-term inflation target of 5-7% and that the bank would ensure it complied with the IMF requirement of keeping the open market and interbank rates for the currency close to one another.

The IMF signalled following the bailout that the bank must continue with its monetary tightening cycle to tame inflation.

The State Bank of Pakistan (SBP) has raised its key policy rate by 12.25 percentage points since April 2022 to curb soaring inflation.

The rise in the consumer price index rise slowed in June from a record high of 38% year-on-year in May, but remained elevated at 29.4%. The CPI index decreased 0.3% in June from May.

The government projects inflation to average 21% for the current fiscal year that started on July 1. The IMF, however, forecasts inflation at 25.9% for the same period.

Pakistan’s central bank raised the key rate by 100 basis points to 22% in an off-cycle meeting in June, just weeks after having held rates at a scheduled meeting.

The bank noted on Monday that economic uncertainty had decreased since the last meeting, while near-term external sector challenges have been largely addressed and investor confidence had improved. It projected real GDP growth of between 2% and 3% for this fiscal year.

Pakistan’s government said the rates had been increased on the IMF’s demand in the run-up to the approval of the new bailout agreement.

First Vice Governor Mansouri is due to take over as interim chief after ruling factions failed to appoint a successor to Riad Salameh despite the meltdown that has fuelled poverty and frozen depositors out of their savings.

Salameh, 73, leaves office after a 30-year tenure, tarnished by the meltdown that has paralysed a once sprawling banking system, as well as corruption charges against him at home and abroad – which he denies.

The failure to appoint a new governor reflects wider dysfunction that has left Lebanon with neither a fully empowered government nor a president, further hollowing out a state paralysed by the four-year-old financial collapse.

While Salameh’s departure marks the end of an era, analysts questioned how much Mansouri could change course with the same factions in power.

Mansouri was nominated a vice governor in 2020 by Parliament Speaker Nabih Berri, a pillar of the sectarian system.

Criticising previous policies as unsustainable, Mansouri told a news conference future lending to the government should be restricted to specific uses and conditioned on the state demonstrating it could pay the bank back. He vowed to reject any government financing requests he was not convinced by and which were “outside the legal framework”.

“We are looking at a short transition period that allows the state to be financed through a law from parliament,” he added.

The crisis has given rise to an array of exchange rates for the Lebanese pound, which has sunk by some 98% since 2019. Mansouri said exchange rate unification would “happen without central bank intervention and without spending more money”.

He also said the authorities should phase out a controversial exchange platform known as Sayrafa and lift the peg on the local currency.

‘Last Chance’

The International Monetary Fund said in June the crisis had been aggravated by vested interests resisting reforms.

Mansouri, 51, called on the government to implement a capital control law, a financial restructuring law and a 2023 state budget within six months, saying this was Lebanon’s “last chance” to enact the changes.

The only way to halt the state’s reliance on central bank financing was to improve public finances, he said.

Financial analyst Mike Azar cast doubt on whether Mansouri could follow through with correcting the course of monetary policy in the absence of reforms by government and parliament.

“Will the vice governors do the right thing, even in the face of what will surely be fierce political pressure, or will they fall back on Salameh’s policies of enabling the political parties to avoid any reforms at the cost of the long-term welfare of Lebanon’s economy and society?” he said.

The central bank leadership is selected via the same sectarian power-sharing system that governs Lebanon’s other top posts, leaving its policies subject to political pressure.

Mansouri, a Shi’ite Muslim, is a distant cousin of Berri, who heads the Shi’ite Amal Movement. He is the first Shi’ite to exercise the powers of governor, a post reserved for a Maronite Catholic.

Widely viewed as the linchpin of the financial system until it imploded in 2019, Salameh saw his standing crumble as the meltdown impoverished many Lebanese and froze most savers out of their deposits in the once sprawling banking sector.

His image was further tarnished as one European country after another began investigating whether he abused his powers to embezzle a fortune of Lebanese public money.

Salameh has denied wrongdoing, and told Reuters days before his departure that he had “worked according to the law and respected the legal rights of others” during his tenure.

In May, French and German authorities issued warrants for his arrest. Interpol Red Notices declared him wanted by both countries. The one issued at the request of France cites charges including organised money laundering. The one issued at Germany’s request also cites a charge of money laundering.

The meltdown in Lebanon followed decades of corruption and profligate state spending by the factions that control the government. Many Lebanese hold Salameh and those factions responsible for the collapse that has sunk the currency’s value by 98%.

Defending his tenure in an interview on Wednesday, Salameh said he had been made a scapegoat for the meltdown, saying that the government – not the central bank – was responsible for spending public funds. “I am going to turn a page of my life,” Salameh, 73, told broadcaster LBCI.

His final months in office have seen some officials call on him to quit, while others kept silent.

Asked whether Lebanon’s politicians had washed their hands of him, Salameh told LBCI: “a long time ago.”

Central Bank ‘Shattered’

It has marked a dramatic reversal for a man once seen as a possible president. After taking the helm of the central bank, Salameh built a reputation as a competent steward of the financial system.

This image set him apart from the ruling politicians, many of them militia leaders from Lebanon’s 1975-1990 civil war – although he enjoyed high-level backing from them.

He was a regular at glitzy financial conferences and showered with banking awards, and exercised broad powers as governor.

The financial system he oversaw afforded many Lebanese a standard of living incongruous with their unproductive economy.

Savers enjoyed high interest rates, able to convert their pounds into dollars at a fixed exchange rate which Salameh maintained from 1997 until the collapse.

Their confidence was underpinned by his calm demeanour and mantra that their currency was in good shape, as well as Lebanon sailing through the global financial crisis in 2008.

But the national finances began to creak as dollar remittances slowed, putting growing pressure on a system that required constant inflows of hard currency to keep it going.

Salameh kept the system afloat in 2016 by siphoning off dollars from local banks at high interest rates. Critics described this as a “Ponzi scheme” as it depended on fresh borrowing to pay back existing debt.

The central bank, known as Banque du Liban (BDL), has always said the operations were legal. In Wednesday’s interview, Salameh rejected the notion BDL operated a Ponzi scheme.

As dollars dried up, most savers were frozen out of their foreign currency deposits, or forced to make local currency withdrawals at exchange rates that wiped out most of the value.

“He leaves behind a shattered institution that will have to be restructured given losses of some $76 billion at the BDL,” said Nasser Saidi, a former economy minister and central bank vice governor.

Defending his record on Wednesday, Salameh said the central bank had contributed to “establishing economic stability and development” during 27 years of his tenure.

Warrants

Graffiti sprayed on walls protecting the BDL headquarters reflect the anger many harbour towards Salameh.

The corruption investigations centre on commissions which the central bank charged banks for the purchase of government securities, the proceeds from which went to Forry Associates, a company controlled by Salameh’s brother, Raja.

The Salameh brothers deny diverting or laundering any public funds and deny any wrongdoing. “Neither directly nor indirectly did any money from the Central Bank go to Forry,” Salameh said in Wednesday’s interview.

As part of its investigation, France’s judiciary has summoned Salameh’s brother Raja and one of Salameh’s assistants, Marianne Howayek.

A lawyer for Howayek did not respond to a Reuters request for comment.

Salameh told Reuters his lawyers had submitted legal challenges to the warrants in France and Germany.

Salameh, his brother Raja and Howayek were charged in Lebanon with money laundering, embezzlement and illicit enrichment in February.

But critics have long doubted how seriously the case would be pursued in Lebanon, where politicians can have sway over the judiciary. The judiciary’s independence is enshrined in the constitution, yet even Lebanon’s top judge complained of meddling last year.

Laying out her philosophy in her debut news conference, Hafize Gaye Erkan pledged that her holistic approach would – in addition to interest rate hikes – make use of a range of levers and macroprudential policy tools, potentially including curbs on loan growth in key sectors or credit card spending.

Erkan, who was appointed in early June after President Tayyip Erdogan secured another term in office, vowed on Thursday to continue the gradual monetary tightening and more than doubled the bank’s end-2023 inflation forecast to 58.0% from 22.3%.

Her comments follow two smaller-than-expected interest rate hikes under her auspices in June and July – which lifted the benchmark to 17.5% – well behind inflation which ran at just below 40% in May.

But it was the repeated use of the word holistic – or “bütüncül” – by the former Goldman Sachs banker and Turkey’s first female central bank chief that caught most of the attention.

“That’s the buzzword – holistic,” said Kaan Nazli, a portfolio manager at asset manager Neuberger Berman, who noted her emphasis on a slowdown in domestic loan growth – a lever to tighten policy outside the lifting of lending rates.

Under Erkan, the central bank has begun to simplify a complex set of macroprudential measures – those aimed at ensuring financial system’s stability – implemented under the former governor and has supported the rate hikes with qualitative and selective credit tightening.

“We are making the gradual and steady rate hikes more holistic and stronger through quantitative tightening and selective credit tightening,” Erkan told the news conference.

Erkan forms the country’s top economic team together with respected veteran policymaker Mehmet Simsek who returned to head Turkey’s Finance Ministry after the election. Both are expected to tackle economic strains that have sent the lira to consecutive record lows, embedded double-digit inflation and vaporised tens of billions of dollars of foreign exchange reserves.

Tim Ash, a strategist at BlueBay Asset Management said he had counted the new governor using the word eight times, earning her the nickname “Holistic Hafize” while her message to markets was that policy makers would opt for learning and calibrating in their decision making rather than shock-and-awe moves.

“The market just does not think that Simsek and Erkan have a mandate to do whatever it takes to fight inflation, at least not when it comes to policy rates, and that Erdogan is still the rate setter,” said Ash.

While a “holistic” approach sounded nice, said Ash, it was “really just a sanitised and alternative word for “unorthodox”.

Smooth Performance

There was broad agreement among investors that Erkan is facing an uphill struggle with her strategy unlikely to deliver a swift pivot towards economic orthodoxy after years of Erdogan pushing for lower interest rates as a remedy for high inflation.

Her approach “is going to be a difficult sell,” said Marek Drimal, strategist at Societe Generale. “Unless the credit and monetary tightening really kick in, investors would expect the central bank to hike more aggressively,” he said.

Sceptical about her policies, analysts still praised Erkan’s performance at the more than hour-long news conference.

Unlike some of her predecessors, Erkan chose to answer all the questions at the news conference herself, rather than defer them to her colleagues, switching easily between Turkish and English during the live event.

“She clearly wants to be the face of Turkish monetary policy making,” said Neuberger Berman’s Nazli.

She swerved politically charged questions on the influence of Erdogan’s government on monetary policy making – a thorny issue for the nation of 85 million where many are reeling under a cost of living crisis.

Emre Akcakmak at East Capital, said that Erkan’s inaugural conference left the impression of a competent policy maker with realistic expectations.

“She didn’t go into this fight with the past. She didn’t talk about the previous management. She could have talked about the mess that she’s in,” he said.

“We saw a person who seems to be capable of being a central bank governor, compared to previous governors, but cautious.”