Bahrain expects to issue between $2bn and $3bn in international bonds and sukuk during 2025, following a $1bn sukuk already issued by state-owned Bapco Energies this month, according to financial experts on January 27.

Market analysts indicate that while the planned issuance continues Bahrain's recent pattern of sovereign debt activity, potential challenges could emerge if global liquidity conditions tighten significantly or oil prices drop sharply.

Alexander Perjessy, vice president and senior credit officer at Moody's, which maintains a B2 stable rating for Bahrain, drew parallels to March 2020 when the kingdom faced refinancing difficulties amid plummeting oil prices during the pandemic.

The 2025 issuance plans come as Bahrain faces $2.4bn in external bonds and sukuk maturities, slightly higher than 2024's $2bn but comparable to 2023's $2.5bn.

However, total public sector external repayments are expected to decrease in 2025, following Bapco Energies' $1.6bn repayment in 2024.

S&P Global Ratings projects sovereign issuance volume to reach between $2bn and $2.5bn, representing 5-7% of GDP, similar to the government's 2024 issuance of $3.25bn including central bank activity.

This level of borrowing could push Bahrain's debt-to-GDP ratio above 135% in 2025.

Dr Mohamed Damak, managing director at S&P Global, noted that issuance levels could be reduced if Bahrain receives additional GCC support or if oil prices significantly exceed current expectations.

The outlook comes as markets await the impact of US President Trump's recent calls for OPEC to reduce oil prices, citing potential effects on the Ukraine conflict.

In the retail banking sector, despite recent increases in external debt, deposits remain dominated by regional GCC sources, leading analysts to expect only "sporadic and opportunistic" issuances from retail banks.

This cautious approach was recently demonstrated when Bank ABC withdrew from a planned $400mn AT1 issuance citing market conditions.