In the FT, Elaine Moore and Jonathan Wheatley report about the increasing importance of sovereign-backed corporate and other debt in emerging markets.
New figures from JPMorgan and Bond Radar show that issuance of quasi-sovereign bonds outpaced that of sovereign bonds in emerging markets last year, raising the stock of such debt from $710bn in 2014 to a record $839bn by the end of 2015. By comparison, the stock of all external emerging market sovereign debt stood at $750bn at the end of last year, according to JPMorgan.
Quasi-sovereign borrowers include firms that are owned in large parts or controlled by the state, as well as local governments. Although the liabilities of these borrowers may be explicitly or implicitly guaranteed by the state, the official public debt statistics typically do not account for them.
The Economist reviews developments on the debt front:
Between 2007 and 2013 the ratio of government debt to GDP in the euro area rose from 66% to 93%. The spike was more dramatic in the periphery (see chart): in Greece the ratio increased to 175% and in Portugal it virtually doubled to 129%.
The figure in the article shows debt quotas in six countries between 2007 and 2013. The article continues:
Despite Italy’s staggering government debt, its households owe less than Germany’s and its non-financial companies not much more. Spain’s private sector has deleveraged substantially over the past few years, as big recapitalisations have left its banks better able to withstand write-downs of bad loans.
One conclusion put forward is that governments will not be able to reduce debt quotas in the foreseeable future to the levels before the financial crisis.