Bahrain Debt Hits $60bn as Oil Revenue Falls Sharply

Bahrain’s total government debt reached $60 billion as of March 31. This figure combines $43 billion in external obligations and $17 billion in domestic borrowing. The country faces rising pressure to service this debt.

Oil production has dropped significantly, straining state finances. Economists warn that servicing costs will become harder to manage after 2026. The US-Israeli conflict with Iran has further reduced energy exports.

Debt levels rise sharply

External debt increased from $37 billion in 2024 to $43 billion. The prospectus dated June lists these international and regional borrowings. Bahrain’s debt-to-GDP ratio was the 13th highest globally last year.

Interest payments consumed $2.8 billion in 2025. This amount represented 37 percent of annual government revenue. Budget figures suggest these costs will rise to $3.1 billion this year.

Oil output declines steeply

Oil activities fell 37 percent in the first quarter. Real GDP shrank 3.8 percent year on year during that period. Hydrocarbons still generate 15 percent of the country’s total economic output.

Daily oil production averaged only 44,000 barrels in the second quarter. This is down from 179,000 barrels in 2025. S&P Global raised its deficit forecast to 8.4 percent of GDP.

Borrowing costs continue to climb

A 10-year bond issued in June carried a 7.1 percent coupon. By September 18, its yield had risen to 8.3 percent. Debt spreads widened to 215-265 basis points above Abu Dhabi’s levels.

Fitch downgraded Bahrain in February due to rising debt relative to GDP. Analysts at AGBI note that the debt ratio could top 200 percent. The government did not respond to requests for comment.