Bailed-Out Bahrain Has Little Room for Maneuver in Economy Reboot

Saudi Arabia, along with Kuwait and the United Arab Emirates, came to the rescue of Bahrain last year when a prolonged period of lower oil prices pushed its public debt to nearly 93 percent of annual economic output, Reuters reported. Their $10 billion bailout pledge, along with Bahrain’s inclusion in JPMorgan’s emerging market indexes, have transformed its bonds from a busted bet to a boon for investors. The price of Bahrain’s 2028 dollar bonds has risen by a third from a record low last June when the country looked in danger of default. But that upward trajectory could go into reverse if Manama does not tackle its spending overruns. With an overall deficit last year equivalent to 11.7 percent of annual economic output, according to an estimate by the International Monetary Fund (IMF), Bahrain would need to introduce a raft of new taxes and spending cuts to eliminate its budget deficit by 2022, a target set as part of its bailout. Read more