© Reuters.

By Yousef Saba

DUBAI (Reuters) – Bahrain is expected to raise $2 billion in a three-tranche bond sale on Wednesday, a document showed, after the coronavirus pandemic and low oil prices exacerbated its fiscal deficit and pushed total outstanding debt to nearly $40 billion.

The debt sale comes amid uncertainty over future fiscal help for the small oil-producing state, as wealthier Gulf neighbours who have previously come to Bahrain’s aid have their own financial woes to deal with.

Bahrain gave initial price guidance of around 4.875% for a seven-year bond tranche, around 5.75% for 12-year notes and around 6.75% for 30-year bonds, according to the document from one of the banks arranging the deal.

Bahrain’s fiscal deficit is estimated to have more than doubled to $4.4 billion last year, compared with a budgeted $2.1 billion, according to a bond prospectus reviewed by Reuters, that cited preliminary estimated figures.

That pushed its deficit to 14% of gross domestic product, compared with a budgeted 7% and a deficit that was 5% of GDP in 2019.

In 2018, Saudi Arabia, the United Arab Emirates and Kuwait pledged a $10 billion aid package over five years to Bahrain. That aid is estimated to cover about half of Bahrain’s total financing needs through 2022, the prospectus said.

Bahrain has so far received more than $6 billion out of that zero-interest package and expects a further $1.85 billion this year.

But the prospectus said there was no assurance that any further support may be available and that the timings of pledged fiscal support may be subject to delays.

“Saudi Arabia and other GCC countries have also been significantly negatively impacted by the COVID-19 pandemic and low oil prices, and such factors may reduce the likelihood of additional support and timing of any payment,” it said.

Bahrain’s total outstanding debt was $39.8 billion as of the end of 2020, soaring to 118% of GDP. It stood at $36.1 billion a year earlier, or 93.8% of GDP.

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