Interest burden on EM governments grows dramatically amid borrowing spree
EM governments face dramatically higher interest burden amid borrowing spree: Interest owed by emerging-market governments has risen dramatically over the past decade as borrowing levels soar, the FT writes. Statistics published by the Institute of International Finance (IIF) shows that debt-to-GDP levels among developing economies has risen to 49.7% in 2019 from 34% in 2008. Total debt owed by emerging markets has risen more than 500% since 2002. As of this year, EM governments are USD 15 tn in debt, up from just USD 2.9 tn 17 years ago. “The dramatic increase in the stock of government debt over the past decade has resulted in a big jump in government interest expenses in some jurisdictions which could mean more pain for future taxpayers while crowding out vital public investment,” Emre Tiftik, deputy director of global policy initiatives at the IIF, said.
Worryingly, these figures don’t include off-balance sheet liabilities such as pensions, public / private partnerships and credit guarantee programs. “When you incorporate those, these figures might become more scary,” Tiftik said.
It’s not so bad for Egypt, according to the IMF’s crystal ball: Egypt’s debt-to-GDP ratio is set to decline over the coming years, despite a substantial rise in interest payments, according to IMF forecasts released in April. The government’s interest bill is projected to rise by around EGP 140 bn to EGP 575.7 bn between fiscal years 2017-18 and 2022-23. However sustained economic growth will mean that our debt interest-to-GDP ratio will fall to 6.0% from 9.9% over the same period.