MANAMA: Bahrain must drastically curb and reduce public debt – or face a potential crisis. This warning has come in the audit report, which fears an international ratings downgrade if swift action is not taken.
The National Audit Office Report showed the overall public debt stood at BD3.8 billion last year, compared with BD3.1bn in 2011.
The loan ceiling rose by 42 per cent last year to reach BD5bn, up from BD3.5bn in 2011.
The report urged the Finance Ministry to rethink its borrowing policies to avert facing insolvency and stressed the need to find other funding alternatives for Bahrain to be able to continue repaying its loans and avert further interests on debt.
According to updated figures released in the report, increased annual loan ceiling caused public debt inflation to rise by 187pc last year, compared with the 2009 benchmarks.
The report warned that international financial agencies could downgrade Bahrain’s rating, which would mean higher interest rates on development loans granted to Bahrain. It warned that Bahrain could find it difficult to honour its future obligations and sustain further accumulated interests on the loans in case it fails to contain public debt and tame debt inflation.
According to the report, the loan interest soared to BD150 million last year – including BD92m as external interest, while interests on local loans topped BD58m.