Bahrain is highly susceptible to government liquidity and external vulnerability risks.
Wednesday 14, August 2019 BY KUDAKWASHE MUZORIWA
Moody's Investors Service (Moody’s) said that the credit profile of Bahrain (B2 stable) reflects a sharp and persistent deterioration in the government's balance sheet, which has intensified since the oil price decline in 2014.
Alexander Perjessy, a Moody's Vice President – Senior Analyst, said, “Bahrain's public finances are highly sensitive to oil price fluctuations because of a very high share of oil-related revenues in government revenue and a very high fiscal breakeven oil price.”
However, the rating agency said that the Kingdom’s credit strengths which include very high per capita income, a diversified economy compared with fellow GCC states and a positive net international investment position provides some shock-absorption capacity.
Bahrain’s credit profile is also supported by the financial support package committed in 2018 by neighbouring GCC governments, equivalent to more than 25 per cent of GDP.
Moody’s said that a more rapid fiscal consolidation than expected that stabilises and eventually decreases the government's debt burden would be positive for the sovereign credit profile.
Additionally, the rating urgency urged the Kingdom to embark on a substantial and sustained rebuilding of the central bank's foreign-currency buffers that will materially decreases external vulnerability.