Emerging Markets Suffering High Debt Costs

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.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza