The bond issuance was structured into two tranches: a $1 billion conventional bond with a maturity of 12 years at an interest rate of 7.75%, and a $1 billion sukuk (Islamic bond) maturing in just over seven years, with a yield of 6.25%. The sale drew an overwhelming demand, with total bids exceeding $8.8 billion, underscoring strong investor appetite despite the global economic challenges.
This bond issuance is particularly crucial for Bahrain as the nation grapples with projected budget deficits. For 2023, Bahrain is anticipating a deficit of 494 million dinars ($1.31 billion), which is expected to decrease significantly to 76 million dinars in 2024. The larger deficit in 2023 is attributed to an anticipated 21% decline in oil revenues, with the government forecasting oil prices to average $80 per barrel, down from $100 the previous year.
Bahrain's fiscal strategy, which includes targeted budget balance by 2024, was delayed due to the pandemic. The current bond sale is seen as a strategic move to maintain financial stability and continue funding key government projects.
The issuance was managed by a consortium of major international and regional banks, including Bank ABC, Citi, First Abu Dhabi Bank, HSBC, JPMorgan, National Bank of Bahrain, and Standard Chartered. The success of the bond sale highlights Bahrain's ability to attract significant investment despite global economic uncertainties, further bolstering its position in the Gulf region's financial markets.
This bond sale not only provides Bahrain with necessary funds to manage its budget deficits but also reinforces its commitment to achieving financial sustainability in the coming years.