Emerging market debt- to- GDP ratio returns to record high 254%: IIF

Emerging markets’ debt- to- GDP ratio returned to record highs despite a $ 6.4 trillion decline in the global debt pile to $ 290 trillion in the third quarter due to a strong dollar and slowing bond sales, an Institute of International Finance ( IFF) report found. Budget deficits and slower economic growth lifted the debt- to- GDP ratio in developing economies to 254percent, matching a record high hit in the first quarter of 2021, the IIF said in its latest Global Debt Monitor published on Tuesday.

The amount of overall emerging market debt, however, slipped to $ 96.2 trillion from $ 98.7 trillion the previous quarter. Meanwhile the global debt- toGDP ratio fell for a sixth consecutive quarter, to 343percent of GDP. Soaring energy and food prices have continued to push interest rates and funding costs higher globally, while governments have ramped up spending to shore up economies. “In the face of tightening global financing conditions, access to international markets has become even more challenging for many high- yield borrowers this year,” Emre Tiftik, director of sustainability research at the IIF wrote in the report. “The global sovereign interest bill is set to increase rapidly, notably for sub- Saharan Africa but also in EM Europe.” The higher cost of debt servicing could particularly hurt countries most exposed to the effects of climate change, the IIF said.