Bahrain is in talks with banks about potentially issuing an international bond this year, two sources aware of the matter said, as the Gulf country seeks to raise funds to cover a budget deficit created by cheap oil.

The small energy exporter, with less generous oil and financial reserves than its neighbours, has been hit hard by the drop of oil prices, which reached their lowest levels in 6-1/2 years in August.

Bahrain sent an invitation to a group of local and international banks a few days ago, and banks are waiting for a decision from the kingdom on which lenders will handle the sale, according to the sources, who spoke on condition of anonymity as the information isn't public.

They did not provide more details, and it was not clear whether the bond would be a conventional one or an Islamic sukuk issue.

Calls and emails seeking comment from the central bank of Bahrain went unanswered.