Bloomberg/Phil Weymouth

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Bahrain mulls first bond issuance since $10 billion lifeline

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The potential sale will test investor confidence in Bahrain, which struggled to tap international bond markets last year.

Wednesday 08, May 2019

(Bloomberg) --Bahrain is planning to return to international bond markets this year for the first time since the Kingdom’s Gulf allies pledged a $10 billion package to help repair its finances and support its currency.

Government officials are in talks with banks for a possible issuance in the second half of the year and have already met global investors in a non-deal roadshow. Bahrain delayed plans to sell bonds earlier this year after taking measures to cut spending and saying it intended to balance its budget by 2022, two people said.

Under a five-year programme agreed on with its neighbours and led by Saudi Arabia, the country has pledged to raise its non-oil revenue and slash spending to trim its budget deficit and ballooning debt.

Bahrain’s finances came under pressure after the 2014 oil-price slump. The government has $6.8 billion of debt maturing this year and will need to fund a budget deficit estimated at $1.9 billion.

International Monetary Fund (IMF) estimates that include extra-budgetary expenditures show Bahrain will run a deficit of 8.4 per cent of economic output in 2019 and 7.7 per cent next year.

The IMF advised the government to introduce direct taxes, reduce exemptions for a five per cent value-added-tax (VAT) and phase out untargeted subsidies.

But a plan to reform subsidies was scrapped this week because authorities feared it may stoke unrest in the country.

The country has one of the Gulf’s weakest finances, with S&P Global estimating its net debt at about 63 per cent of economic output this year.

Additionally, interest payments make up about 25 per cent of revenue, the ratings company said in a report this month.

 

TAGS : Bond issuance, Gulf Aid, Kuwait, Saudi Arabia and the UAE aid, 2014 oil-price slump, IMF, S&P Global

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