However, that may not necessarily deter investors from future debt issuances, analysts say.
"Dar al Arkan came to market at a difficult time with a rare sub-investment grade [rated] sukuk," said Khalid Howladar, a vice president at Moody's, referring to a recent bond sale by a Saudi property developer. "They paid a high coupon but it's not the rating that decides whether it's successful. In theory a lower rating just means the borrower has to pay a little more but as an investor - as long as you reward me for risk - I'm willing to take it."
Moody's Investors Service lowered Bahrain's ratings to "A3" from "A2" yesterday, citing concerns about rising government spending and a relatively small cushion of oil savings to tide it over through deficits. But economists said yesterday the country remained on a relatively strong fiscal footing. The downgrade, they said, was a means of drawing distinctions between Bahrain and its more oil-rich neighbours.
"The fiscal situation is not something that's alarming," Giyas Gokkent, the chief economist of the National Bank of Abu Dhabi, told Bloomberg, citing low public debt as a portion of GDP. Bahrain's government debt amounts to about 30 per cent of its GDP.
Those low debt levels, though, come at a time when Bahrain continues to spend on major development projects even without a large backstop of oil savings.
That, Moody's said, distinguished the country from its neighbours. While Saudi Arabia, Kuwait and Abu Dhabi are all pursuing ambitious development and spending plans of their own in spite of the financial crisis, they hold hundreds of billions of dollars of oil savings and sit on some of the world's largest oil reserves.
Bahrain, by contrast, has neither large oil reserves or a big pool of savings to draw on in case of government budget deficits.
The country's largest sovereign wealth fund is the Mumtalakat Holding Company, which controlled about US$12.7 billion (Dh46.64bn) of assets at the end of last year, according to its financial statements.
To bring its rating back up, Bahrain may have to rethink how it spends, saves and budgets. Yet Moody's said yesterday there was little room for the country to raise revenues to substitute for the relative dearth of oil savings.
The country's ability to raise revenues was "constrained by the absence of personal income tax and [value-added tax]". Such taxes would be hard to introduce because Bahrain is competing for business with Gulf countries that do not levy them, Moody's said.
The agency also pointed to concerns about Bahrain's banking system, a key fixture of the island country's economy that has come under significant stress because of banks' exposure to property projects.
Foreign investors fled the property sector across the Gulf during the financial crisis, leading to sharp declines in prices.
Several Bahraini investment companies have also fallen on hard times, including Gulf Finance House, the Islamic investment bank that recently announced its seventh straight quarterly loss and is in the middle of a wholesale restructuring of its business.
"Moody's believes that, over the longer term, Bahrain's banking sector will increasingly face competition as other regional financial centres develop," the agency said, adding that although banks were "only a limited contingent liability for the government", they had assets worth about three times the country's GDP.
afitch@thenational.ae
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
F1 line ups in 2018
Mercedes-GP Lewis Hamilton and Valtteri Bottas; Ferrari Sebastian Vettel and Kimi Raikkonen; Red Bull Daniel Ricciardo and Max Verstappen; Force India Esteban Ocon and Sergio Perez; Renault Nico Hülkenberg and Carlos Sainz Jr; Williams Lance Stroll and Felipe Massa / Robert Kubica / Paul di Resta; McLaren Fernando Alonso and Stoffel Vandoorne; Toro Rosso TBA; Haas F1 Romain Grosjean and Kevin Magnussen; Sauber TBA
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
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Ferrari
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A State of Passion
Directors: Carol Mansour and Muna Khalidi
Stars: Dr Ghassan Abu-Sittah
Rating: 4/5
Day 5, Abu Dhabi Test: At a glance
Moment of the day When Dilruwan Perera dismissed Yasir Shah to end Pakistan’s limp resistance, the Sri Lankans charged around the field with the fevered delirium of a side not used to winning. Trouble was, they had not. The delivery was deemed a no ball. Sri Lanka had a nervy wait, but it was merely a stay of execution for the beleaguered hosts.
Stat of the day – 5 Pakistan have lost all 10 wickets on the fifth day of a Test five times since the start of 2016. It is an alarming departure for a side who had apparently erased regular collapses from their resume. “The only thing I can say, it’s not a mitigating excuse at all, but that’s a young batting line up, obviously trying to find their way,” said Mickey Arthur, Pakistan’s coach.
The verdict Test matches in the UAE are known for speeding up on the last two days, but this was extreme. The first two innings of this Test took 11 sessions to complete. The remaining two were done in less than four. The nature of Pakistan’s capitulation at the end showed just how difficult the transition is going to be in the post Misbah-ul-Haq era.
Manchester City transfers:
OUTS
Pablo Zabaleta, Bacary Sagna, Gael Clichy, Willy Caballero and Jesus Navas (all released)
INS
Ederson (Benfica) £34.7m, Bernardo Silva (Monaco) £43m
ON THEIR WAY OUT?
Joe Hart, Eliaquim Mangala, Samir Nasri, Wilfried Bony, Fabian Delph, Nolito and Kelechi Iheanacho
ON THEIR WAY IN?
Dani Alves (Juventus), Alexis Sanchez (Arsenal)
Company%C2%A0profile
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What to watch out for:
Algae, waste coffee grounds and orange peels will be used in the pavilion's walls and gangways
The hulls of three ships will be used for the roof
The hulls will painted to make the largest Italian tricolour in the country’s history
Several pillars more than 20 metres high will support the structure
Roughly 15 tonnes of steel will be used
KILLING OF QASSEM SULEIMANI
Cryopreservation: A timeline
- Keyhole surgery under general anaesthetic
- Ovarian tissue surgically removed
- Tissue processed in a high-tech facility
- Tissue re-implanted at a time of the patient’s choosing
- Full hormone production regained within 4-6 months
More from Neighbourhood Watch:
The years Ramadan fell in May
Baby Driver
Director: Edgar Wright
Starring: Ansel Elgort, Kevin Spacey, Jamie Foxx, Lily James
Three and a half stars
Expo details
Expo 2020 Dubai will be the first World Expo to be held in the Middle East, Africa and South Asia
The world fair will run for six months from October 20, 2020 to April 10, 2021.
It is expected to attract 25 million visits
Some 70 per cent visitors are projected to come from outside the UAE, the largest proportion of international visitors in the 167-year history of World Expos.
More than 30,000 volunteers are required for Expo 2020
The site covers a total of 4.38 sqkm, including a 2 sqkm gated area
It is located adjacent to Al Maktoum International Airport in Dubai South
Killing of Qassem Suleimani
Fixtures
Wednesday
4.15pm: Japan v Spain (Group A)
5.30pm: UAE v Italy (Group A)
6.45pm: Russia v Mexico (Group B)
8pm: Iran v Egypt (Group B)
