Bond-Market Bargain or Pariah? Oil Clouds Bahrain's Outlook - Bloomberg:
Bahrain went from being a bond-market pariah to a darling this year after its Gulf neighbors came to the rescue to ward off any default. But falling oil prices have put the island kingdom’s finances under scrutiny again.
After outperforming Gulf peers in the third quarter, Bahrain’s dollar debt has been hurt by crude’s slump in the past two months. Investors are concerned about the government’s ability to put an austerity plan into action, with oil prices below what it needs to balance the budget. Bahrain’s cost-cutting targets, aimed at eliminating the budget deficit by 2022, are ambitious, Fitch Ratings said in October.
“Gulf Cooperation Council loans will help pull Bahrain back from the brink, but without meaningful fiscal reform, they just kick the can down the road,” said Brett Rowley, the Los Angeles-based managing director for emerging markets at TCW Group Inc, which holds about $198 billion. In addition, “a sharp drop in oil prices could jeopardize recently pledged assistance,” he said.
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