Bahraini Fund Mumtalakat Won’t Sell Assets To Plug Any Budget Shortfall

Bahraini sovereign fund Mumtalakat will not sell any assets or change its investment strategy in response to a likely oil price-driven shortfall in the state budget, it said on Thursday.

The fund holds stakes in Bahraini companies including Aluminium Bahrain, Gulf Air and Batelco. Mumtalakat is fully state-owned, but unlike a sovereign wealth fund it receives no surplus cash from the government, investing money generated from its own returns.

State inflows to sovereign funds are in doubt this year across the Gulf region.

Governments are expected instead to pull tens of billions of dollars out of global markets to help plug deficits created by maintaining high spending at a time when oil prices have fallen the best part of 60 per cent since June.

For Bahrain, the pressure is more pronounced as the Kingdom was running a deficit even before the oil price sank, bridging the gap with sovereign bond and sukuk issues.

In 2013, its deficit nearly doubled to KD410 million ($1.09 billion) despite spending rising at its slowest rate since 2009. Bahrain has yet to publish fiscal data for 2014.

Responding to questions from Reuters, Mumtalakat said it was not expecting Bahraini authorities to dip into its asset pool to fund any cash shortfalls.

“The Bahrain economy is sufficiently robust and diversified to make any outflow from our fund or any other sales, transfers or privatisations unnecessary,” it said in an emailed statement.

It noted that non-hydrocarbon sources accounted for more than three-quarters of Bahrain’s GDP, reducing exposure to oil price fluctuations.

In terms of strategic changes for Gulf economies in light of the shifting economic backdrop, Mumtalakat believed it would not need to amend its approach, although it noted greater due diligence would be needed to uncover long-term opportunities amid the short-term volatility.

The fund, which has traditionally focused on Bahrain, has been casting its eyes outside the Kingdom in recent months for acquisitions.

In October, it announced a deal with Bahrain-based Investcorp to acquire U.S. software and services firm PRO Unlimited for around $300 million, as well as buying a significant minority stake in United Arab Emirates-based GEMS Education along with Blackstone and Dubai’s Fajr Capital.