In what could signal heightened risk for the country, Pakistan’s government debt-GDP ratio has risen to 72.1% in Q4 2018 from 67% one-year ago.
In what could signal heightened risks frontier market debt jumped by over $250 billion in 2018, according to a report. Notably, Zambia, Vietnam, and Tunisia saw the largest rise in debt ratios, even as some wealthier markets (e.g. Bahrain, Kuwait) reduced debt. The government debt has now crossed the crucial 50% of GDP-mark, up from 39% in 2012. Zambia, Tunisia and Pakistan registered big increases in 2018, noted a report by the Institute of International Finance.
Notably, the frontier market debt has crossed a whopping $3.2 trillion (117% of GDP)—up from 100% of GDP in 2012. “The public sector has been doing most of the borrowing: general government debt is up $550 billion since 2012, followed by non-financial corporates (+$400 billion),” said the report.
Taking stock of the government debt-to-GDP in these markets, the report noted that the ratio is now 15 ppts higher than in 2008. The rise has been most notable for Zambia and Tunisia, while government debt-to-GDP is highest for Jamaica, Jordan, Bahrain and Sri Lanka, said the report. The net interest expense on government debt approximately 3% of GDP in 2019/20, ranging from less than 2% in Kazakhstan to a hefty 6% in Pakistan, Sri Lanka and Ghana, said the report.
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Pakistan’s government debt-GDP ratio has risen to 72.1% in Q4 2018 from 67% one-year ago. However, Jamaica had the largest government-debt to GDP ratio at 101.1%. Sri Lanka’s government debt to GDP stands at a whopping 84%, up from 79.1% in the previous year, data from the report showed. Tunisia’s ratio stood at 77% while Zambia’s ratio stood at 72.4%, up from 62.7% in the previous year.
Apart from the increased debt, the forex denominated bond issuance has also tumbled. “Total bond issuance in frontier markets amounted to some $120 billion in 2018— down by more than 15% from 2017,” said the report. Notably, hard currency issuance has been particularly soft: in Q1 2019 the share of issuance in foreign currency dropped to less than 40%, from over 50% a year ago.