Mena sovereign borrowings rise sharply

Date

3/3/2016 1:21:03 PM

(MENAFN- The Peninsula)

By Satish Kanady

DOHA: The Middle East and Northern African (Mena) sovereigns are expected to borrow an equivalent of $134bn from long-term commercial sources in 2016.

This compares with borrowing of $143bn in 2015 which was more than double the $68bn that the region is expected to be borrowed in that year Standard and Poor’s “Mena Sovereign Debt Report 2016” noted.

However the ratings agency noted that its updated estimate for 2015 includes an additional $30bn in borrowing by Iraq. It has included Iraq in the survey for the first time having assigned it sovereign credit ratings in September 2015.

S&P assumes that the GCC’s emerging fiscal deficits would be wholly financed by drawing down on assets. However in the case of Saudi Arabia although the sovereign did liquidate some assets it estimates that the government also borrowed $26bn dollar equivalent in 2015.

All in all it is estimated that GCC countries’ borrowing at $40bn in 2015 rather than the $5bn S&P projected in March 2015.

“We believe a 9 percent decrease in long-term commercial debt issuance in 2016 compared with 2015 will largely result from a decline in borrowing by the Egyptian government due to what we expect will be modest fiscal consolidation.

About 40 percent or $53bn of the sovereigns’ gross borrowing will be to refinance maturing long-term debt compared with $61bn in 2015 resulting in an estimated net borrowing requirement of $81bn” the ratings agency said.

The commercial debt stock of the Mena sovereigns rate is expected to reach an equivalent of $667bn by the end of 2016 up by $85bn or 15 percent from 2015. Adding in bi- and multilateral debt the total stock will reach $814bn a year-on-year increase of $116bn or 17 percent.

The share of noncommercial official debt (bi- and multilateral) in total sovereign debt is set to rise to 22 percent of total debt as of year-end 2016 from 20 percent in 2015. S&P expects that outstanding short-term commercial debt will reach $163bn at year-end 2016.

Globally S&P forecasts a $154bn (2 percent) decrease in commercial borrowing by the 131 sovereigns we currently rate to reach $6.7 trillion in 2016.

The US and Japan will again be the most prolific borrowers this year accounting for 58 percent of the total followed by China Italy and France.

Absolute debt levels continue to increase. The total outstanding global sovereign commercial debt stock is projected to rise during 2016 by almost $1 trillion to reach $42 trillion by the end of this year.

In a breakdown by region Asia-Pacific sovereigns are expected to borrow $2.5 trillion 37 percent of the total amount mostly by Japan and to a lesser extent China and India. In contrast borrowing by sovereigns in Africa and the Middle East is negligible by global comparison.The Peninsula

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