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Bahrain debt hits $48bn but analyst downplays spending fears

A shopping street in Manama. Bahrain's GDP is expected to rise by 3.5% this year Alamy via Reuters Connect
A shopping street in Manama. Bahrain's GDP is expected to rise by 3.5% this year
  • Needs oil breakeven price of about $125
  • Non-oil activity driving GDP growth
  • Unwrought aluminium alloys are top export

Bahrain’s public debt has risen to almost BHD18 billion ($48 billion), according to its ministry of finance, but a banking expert has downplayed concerns over its spending.

Bahrain, the smallest country in the GCC bloc of six with a population of almost 1.5 million people, has dwindling reserves of oil and gas. It is partially reliant on revenues from the Abu Safah field it shares with Saudi Arabia and requires an oil price of about $125 per barrel to achieve budgetary equilibrium.

Interest payments to service the debt were BHD843 million in 2023, the finance ministry said.

Manpreet Gill, chief investment officer for Africa, the Middle East and Europe at Standard Chartered, said last week he was not concerned about the country’s economic viability.

Bahrain’s economy

“Bahrain historically has always had a much higher breakeven, so I don’t think anything has necessarily changed,” Gill said at a roundtable. "I wouldn’t worry excessively about it." 

Last week Aluminium Bahrain (Alba) and the Saudi Arabian Mining Company (Ma’aden) ended talks over a merger. Discussions had been taking place since last year and it had been hoped a deal could be completed in the first quarter of this year, according to Ali Al Baqali, Alba’s chief executive.

The country's economy is nonetheless projected to grow by 3.5 percent in 2025, supported by manufacturing and private sector credit expansion, according to the International Monetary Fund. 

The medium-term forecast for real GDP growth is about 3 percent. This is driven by non-hydrocarbon GDP, which will account for close to 90 percent of the economy by 2029. Inflation is expected to reach 2 percent.

Bahrain’s Information & eGovernment Authority said the value of non-oil imports had increased by 5 percent, reaching BHD478 million in November 2024 in comparison with BHD454 million for the same month in 2023.

Unwrought aluminium alloys were the top exports in November last year (32 percent), followed by agglomerated iron ores and concentrates alloyed (9 percent) and unwrought aluminium not alloyed (8 percent).

In May last year S&P Global affirmed its B+ long-term credit rating on Bahrain. The other major ratings agencies Fitch and Moody’s also rate the country as B+ or B2. All three say its outlook is stable.