Bahrain raises debt ceiling

25 August 2020
Manama remains committed to its Fiscal Balance Programme

Bahrain has raised its debt ceiling to BD15bn ($40bn) from BD13bn to minimise the effects of lower oil prices and reduced economic activity resulting from the Covid-19 pandemic.

Access to additional funds will allow the state to finance general budget expenditures and to cover debt instalments due during 2020 and the next two fiscal years 2021 and 2022.

The change involves Decree No. (15) of 1977 on issuing Development Bonds. The cabinet approved the move proposed by the Ministerial Committee for Financial & Economic Affairs & Fiscal Balance on 24 August during a virtual meeting chaired by Crown Prince Salman bin Hamad al-Khalifa on 24 August.

Despite the economic challenges caused by the Covid-19 pandemic, Bahrain remains committed to the Fiscal Balance Programme that it launched in 2018.

“The committee’s recommendation aims to minimise the effects of falling oil prices which resulted in lower oil revenues, and non-oil revenues that were lower than expected due to a slowdown in global economic activity resulting from Covid-19 precautionary measures," the cabinet said in a statement carried by the official Bahrain News Agency.

"Despite the challenges, the government is committed to the Fiscal Balance Programme which has so far achieved notable results in enhancing spending efficiency and reducing recurrent government expenditures.”

Bond issuances

The Central Bank of Bahrain (CBB) completed a BD150m ($399m) bond issuance in early August. The Government Development Bonds were issued by the CBB on behalf of the Government of the Kingdom of Bahrain. It was the 21st Government Development Bond issuance.

In May, Bahrain issued a $2bn dual-tranche bond comprising a sukuk and conventional bonds. The $1bn sukuk issuance has a tenor of 4.5 years and a coupon rate of 6.25 per cent. The $1bn of conventional bonds has a tenor of 10 years and a coupon rate of 7.375 per cent.

Bahrain said in April that it would cut budgeted expenditure for 2020 by 30 per cent and reschedule construction projects to free up funding for initiatives to combat Covid-19. The cabinet agreed to a 30 per cent cut in operational expenditure for ministries and the government “unless public interests require otherwise”. 

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