Bahrain’s sovereign debt has been pushed further into junk status, after S&P lowered its credit rating on the country from B+ to B. It is the first cut by one of the big three agencies since 2020, but may not be the last: Fitch placed Bahrain on negative outlook this year.S&P cited high government debts and persistent budget shortfalls for its move. It expects the deficit to hit 7.6% of GDP this year, amid subdued oil prices and the government’s reluctance to trim spending for fear of a public backlash. Debt-servicing will eat up a third of government revenue this year and overall debt is expected to reach 139% of GDP by 2028. On Monday, the IMF also urged the authorities to consider a corporate income tax and slashing subsidies.Some small steps are being taken. This week the government cut the investment required for its Golden Residency program by a third to $345,000 to encourage more capital inflows.Separately, S&P upgraded Kuwait’s sovereign credit one notch, pointing to the country’s strong balance sheet. The agency says reform momentum is helping cushion the risks of oil dependence and high spending.— Dominic Dudley
Bahrain’s sovereign debt has been pushed further into junk status, after S&P lowered its credit rating on the country from B+ to B. It is the first cut by one of the big three agencies since 2020, but may not be the last: Fitch placed Bahrain on negative outlook this year.
S&P cited high government debts and persistent budget shortfalls for its move. It expects the deficit to hit 7.6% of GDP this year, amid subdued oil prices and the government’s reluctance to trim spending for fear of a public backlash. Debt-servicing will eat up a third of government revenue this year and overall debt is expected to reach 139% of GDP by 2028. On Monday, the IMF also urged the authorities to consider a corporate income tax and slashing subsidies.
Some small steps are being taken. This week the government cut the investment required for its Golden Residency program by a third to $345,000 to encourage more capital inflows.
Separately, S&P upgraded Kuwait’s sovereign credit one notch, pointing to the country’s strong balance sheet. The agency says reform momentum is helping cushion the risks of oil dependence and high spending.