S&P upgrades Bahrain

Standard & Poor's said it raised the Kingdom of Bahrain's long-term foreign-currency sovereign credit rating to A from A- and its short-term foreign-currency sovereign credit rating to A-1 from A-2, due to accelerated structural reforms. The outlook is stable.

At the same time, the long-term A and short-term A-1 local-currency sovereign credit ratings were affirmed, and S&P raised to A from A- all its foreign-currency senior unsecured debt ratings on all Bahraini sovereign sukuk issues, including the Bahrain Monetary Agency International Sukuk Co.'s $250 million Ijar'a sukuk notes due 2009, for which Bahrain is an obligor.

S&P said the upgrade is supported by the government's continued structural reforms and prudent financial policies, in particular accelerated privatization and improved fiscal transparency, and by a strong government net asset position, which is estimated at about 59% of GDP by year-end 2006 and forecast to remain at more than 50% of GDP until 2009. This compares with an estimated net debt position of about 20.1% of GDP in 2006 for Bahrain's A-rated sovereign peers.

The ratings remain constrained by Bahrain's high dependency on oil revenues, which account for almost 75% of total revenues, the presence of a few significant below-the-line expenditure items in the budget and the external geopolitical risks that affect all countries in the Gulf region, the agency said.

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