Fitch Ratings Downgrades Bahrain to ‘B’ on Rising Debt, Wider Deficits

Fitch Ratings has downgraded Bahrain’s sovereign credit rating to ‘B’, citing rising public debt and widening fiscal deficits. The move reflects growing concerns about the country’s financial position and medium‑term fiscal outlook.

According to the agency, Bahrain’s government debt remains high relative to its economic output. In addition, persistent budget deficits have increased borrowing needs, putting pressure on public finances.

Reasons Behind the Downgrade

Fitch stated that Bahrain faces structural fiscal challenges. While authorities have introduced reforms in recent years, the agency said progress has been slower than expected.

Furthermore, rising interest costs have added to the burden of servicing existing debt. As a result, the country’s fiscal flexibility has narrowed.

Economic Outlook

Despite the downgrade, Fitch noted that Bahrain continues to benefit from support from regional allies. The agency also highlighted ongoing economic diversification efforts beyond the oil sector.

However, lower oil revenue growth and spending pressures have widened fiscal gaps. Therefore, sustained reforms will be necessary to stabilize debt levels over time.

Market Reaction

Credit rating downgrades can increase borrowing costs for governments. Analysts say Bahrain may face higher interest rates when issuing new debt in international markets.

Meanwhile, investors will closely monitor future fiscal measures and economic performance.

What Happens Next?

Fitch said the rating outlook will depend on Bahrain’s ability to control deficits, manage debt levels, and implement structural reforms.

Officials in Bahrain have not yet issued a detailed response to the downgrade.

Conclusion

Fitch’s decision to downgrade Bahrain to ‘B’ underscores concerns about rising debt and widening fiscal deficits. While regional support provides some stability, sustained reforms will be crucial to improving the country’s credit profile.

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