The extent of emerging markets’ foreign-currency borrowing binge is laid bare in new number-crunching from CreditSights.
With EM currencies down a collective 15 percent since the start of the year, the cost of repaying debt and loans denominated in foreign currencies, such as the U.S. dollar and the euro for EM countries, is likely to increase.
With that scenario in mind, CreditSights analysts Richard Briggs and David Watts have analyzed cross-border lending data from the Bank for International Settlements and corporate bond index data from Bank of America Merrill Lynch to try to figure out just how big EM’s foreign debt bill could be.
First up are the BIS data on cross-border lending, scaled against a country’s foreign currency revenue (i.e. exports). Figures range from a mere 6 percent in South Korea to a whopping 56 percent in Brazil.