Bahrain should rein in state spending to curb inflation, which hit 4.8 per cent in February, the Middle East Economic Digest (MEED) reported citing the head of state-owned Economic Development Board (EDB).
"You need to bring down growth so inflation can be more manageable," it quoted EDB Chief Executive Sheikh Mohammed bin Essa Al Khalifa as saying.
The EDB is responsible for formulating and overseeing the economic development strategy of the Gulf Arab kingdom.
Like most of its neighbours in the world's biggest oil-exporting region, Bahrain pegs its dinar currency to the US dollar, which tumbled to record troughs against the euro and a basket of major currencies last month.
Food prices and rents were the major drivers of inflation in Bahrain.
Bahrain would only change currency policy in concert with its neighbours in the biggest oil-exporting region, Sheikh Mohammed said, according to MEED.
"I am not in favour of a currency revaluation," he said. "People talk about it like it is an easy solution, but the dollar has served us well for 30 years and provided stability. If people think a revaluation of itself will solve the inflation problem they are wrong."
Bahrain and four other Gulf Arab states including Saudi Arabia, the world's largest oil exporter, maintain a fixed exchange rate to the US dollar, which has fallen almost 20 per cent against the euro since the beginning of 2007.
The pegs also force Bahrain, Saudi Arabia, the United Arab Emirates, Qatar and Oman to track Federal Reserve interest rate cuts even though their economies are booming on a five-fold rise in oil prices since 2002. (Reuters)
Bahrain urged to curb spending