Moody's Downgrades Bahrain's Rating, Expects Its Debt Burden to Rise to 100% of GDP

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2018-08-04 - 1:10 am

Bahrain Mirror: Rating agency Moody's downgraded on Thursday the government of Bahrain's long-term issuer ratings to B2 from B1 and maintained the negative outlook. Moody's expected Bahrain's debt burden to rise to around 100% of GDP

It said the key driver for the rating downgrade was a further rise in Bahrain's external and government liquidity risks to particularly elevated levels, constraining access to market financing to a greater extent than previously envisaged.

The B2 rating assumes that the kingdom's Gulf Cooperation Council (GCC) neighbors will provide some financial support, and without which Bahrain's creditworthiness would be significantly weaker.

The agency uses symbols to describe creditworthiness, starting from AAA as the highest creditworthiness, reaching the less creditworthiness through letters AA, A and BBB.

Bahrain currently faces economic pressures that affected its public finances, prompting Saudi Arabia, UAE and Kuwait, the end of June, to pledge their support to Bahrain.

"The negative outlook reflects the risk that financial support from the GCC is not timely and comprehensive enough to maintain Bahrain's credit profile at B2 through a series of forthcoming debt repayments, including a $750 million sovereign sukuk repayment due on 22 November 2018."

Moody's estimates that Bahrain's financing needs amount to more than 30% of GDP in 2018-20, a very high level internationally.

Moody's continues to expect Bahrain's debt burden to rise to around 100% of GDP at the turn of the decade, from just under 90% in 2017.

Bahrain is considered the least productive of oil resources contact between GCC states. It produces about 200 thousand barrels of crude oil daily.

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