Bahrain – Ratings Affirmed; Outlook Revised to Negative

Rating Action

Capital Intelligence Ratings (CI Ratings or CI) today announced that it has affirmed Bahrain’s Long-Term Foreign Currency Rating (LT FCR) and LT Local Currency Rating (LT LCR) at ‘B+’. At the same time, CI Ratings has affirmed the sovereign’s Short-Term FCR (ST FCR) and ST LCR at ‘B’. The Outlook for the ratings has been revised to Negative from Stable.

Rating Rationale

The revision of the outlook reflects weakening public finances, including very high central government debt as well as increasing liquidity risks. The latter is due to the central government’s large gross financing needs and dependence on cross-border funding, rendering the sovereign’s access to the capital markets vulnerable to shifts in investor risk perception. The outlook revision also takes into consideration Bahrain’s external vulnerabilities, which are exacerbated by the modest and declining coverage ratio of foreign exchange reserves to short-term external debt on a…