BAHRAIN: Fiscals look weak ahead of bond issuance
Bahrain is looking to issue around $2bn in 7-30 year bonds, its third issuance in less than a year. This is to refinance a bond maturing next week, given a paucity of FX reserves, and partly finance the large and structural deficit. The data from the bond prospectus on the 2020 fiscal outturn looks even weaker than expected, and although Gulf allies continue to disburse loans and grants, there is little sign Bahrain is nearing a point where it could stand on its own feet, particularly given doubts about the prospects for its shale oil reserves.
2020 outturn is even weaker than it looks
During the investor call for the September issuance, Bahrain had provided guidance that it expected that the 2020 deficit would be close to the -6.5% of GDP shown in the revised budget. We had expressed skepticism about this because all the revised budget did was increase expenditure by $551m, while leaving the revenue assumption unchanged from the one sketched out pre-Covid and with a $60/barrel oil assumption. The preliminary outturn in the prospectus (which notes that it could be subject to material change in the final accounts) shows spending in line with the revised budget but a sharp reduction in revenue, as expected, resulting in a deficit of -$4.4bn (14% of GDP).
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