MANAMA: Moody’s has today changed the outlook to stable from negative on the Government of Bahrain’s issuer ratings and affirmed the ratings at B2.
The key driver of the outlook change to stable is Moody’s assessment that Bahrain’s government and external liquidity risks, while remaining elevated, have materially reduced following the announcement of a $10 billion financial support package from Bahrain’s Gulf Cooperation Council (GCC) neighbors.
Financial support and the fiscal consolidation measures (the Fiscal Balance Program, FBP) that are set to accompany it will support investors’ confidence and help to reduce the government’s financing needs. In turn, this will slow a further weakening in Bahrain’s public finances in a way that is consistent with a B2 rating
The affirmation of Bahrain’s B2 rating reflects Moody’s view that, despite the recent reduction, the sovereign’s external vulnerability will remain very high with persistently low foreign exchange reserves.
Moreover, Moody’s expects that, despite some fiscal consolidation, Bahrain’s government debt burden will continue to rise, as political and social considerations will prevent a full implementation of the FBP. These credit challenges are set against Bahrain’s key credit strength — its relatively diversified and dynamic economy.
