Frontier market debt burden rises to $3.2 t in 2018: IIF

LONDON (Reuters): Smaller and riskier emerging markets hit $3.2 trillion in debt at the end of 2018, but hard currency issuance by governments and companies slowed, an Institute of International Finance (IIF) report showed on Tuesday. 

Debt owed by governments, companies, financial institutions and households across so-called frontier countries rose by more than $250 billion during 2018 to reach 117% of gross domestic product compared to 100% in 2012, the IIF said. 

And a steep rise in government debt could prove painful for vulnerable economies across a 26 country sample ranging from Pakistan and Kazakhstan to Vietnam and Bahrain, it added. 

“At around 50%, government debt-to-GDP is 15 percentage points higher than in 2008,” IIF economist Khadija Mahmood wrote in a note. 

“The rise has been most notable for Zambia and Tunisia, while government debt-to-GDP is highest for Jamaica, Jordan, Bahrain and Sri Lanka.” Emerging markets had a torrid year in 2018 with crisis in Turkey and Argentina roiling developing nations around the world while the prospect of rising borrowing costs did little to soothe frayed investor nerves. 

Issuers from many smaller and riskier economies have found it difficult to tap capital markets in recent months. 

Data from the IIF showed debt sales in hard currency from frontier markets has fallen to less than 40% of total issuance, compared to more than 50% a year earlier.