Emerging market debt rose to a new record high last year, at a time when debt fell worldwide, supported by strong growth that stimulated inflation rates.
The significant rise in the cost and requirements of lending contributed to an increase in emerging market debt to an all-time high of $98 trillion by the end of 2022, compared to the pre-pandemic level of $75 trillion, according to IIF data released on Wednesday.
Globally, total debt fell by nearly $4 trillion to below $300 trillion last year. The debt-to-GDP ratio has also declined, although it is still above pre-pandemic levels.
This contradicted the estimates of “S&P Global”, which indicated earlier that the increase in interest rates during the past year led to an increase in the debt burden. “Assuming that regarding 35% of global debt has a variable rate that is sensitive to monetary policy, last year’s rate hike cycle added another $3 trillion to debt servicing costs, according to S&P,” she said in a report.
And at a time when most countries in the world are accelerating to increase interest rates to control inflation, this places burdens on heavily indebted countries, and forces governments and companies to reduce debt and spending, according to the credit rating agency.
