MANAMA: The cost of insuring Bahrain's government debt rose for a fifth day on concern political unrest will intensify throughout the Middle East as governments crack down on pro-democracy demonstrations. Credit-default swaps on Bahrain rose 18 basis points to 304, the highest since July 2009, according to CMA. Swaps on Saudi Arabia, seen as measure of confidence in the country although they reference no debt, climbed 10.5 basis points to 137, the highest in 19 months. Meanwhile, Fitch Ratings credit rating agency warned Bahrain Thursday that it may lower the Gulf country's debt rating as the kingdom reels from growing political unrest that has reportedly claimed four lives. It said its decision to put Bahrain's A rating on notice for a downgrade is due to the growing political unrest and the fact that it looks increasingly likely that the protests will be extended. It said a substantial worsening in the security situation would prompt the downgrade but that a restoration of order that looks like it may last would lessen the pressure for the agency to act. "The Rating Watch Negative reflects the intensification of unrest, which together with the growing divide between protestors' demands and the government's position on political reform suggests that the protests will be extended," said Purvi Harlalka, director of Fitch's Middle East and Africa division. "The unrest has created economic and political uncertainties, which increase the risks to the sovereign's credit profile." Fitch said the protests have already had an impact after the government's announcement last weekend that it was handing out benefits that totaled around 2 percent of Bahrain's national income, and that the longer they carry on the greater the risks they pose to the economy and the public finances. One of the measures announced was directed at increased investment in public housing. Fitch said the worry lies in the fact that the recently announced measures have come on top of an already expansionary budget that would see gross debt more than double to 38 percent of Bahrain's gross domestic product by 2012 from just 16 percent in 2008. Though Fitch did note that Bahrain has a "demonstrated track record of fiscal prudence" and that the current level of oil prices make the new measures more affordable, it said the increase in debt is weakening the kingdom's creditworthiness. Fitch said it will monitor political developments and their economic impact and aims to make a decision on Bahrain's rating within the usual three- to six
