As of early 2025, emerging market (EM) debt has reached approximately $106 trillion, accounting for about 245% of GDP in these economies. This marks a significant increase from the previous year’s $99 trillion, indicating a continued upward trend in borrowing among developing nations .
Breakdown of Emerging Market Debt
- Hard-Currency Debt: The EM hard-currency sovereign bond market is valued at around $1.2 trillion, with countries like China, Brazil, India, and Mexico leading in local currency bond issuance, which collectively exceeds $7 trillion .
- Regional Highlights:
- Gulf Cooperation Council (GCC): GCC countries, particularly Saudi Arabia, the UAE, and Qatar, have been prominent issuers of US dollar-denominated debt, with 2024 issuance reaching $133.4 billion, accounting for about a quarter of all EM US dollar debt issued, excluding China .
- Sub-Saharan Africa & Latin America: These regions face increasing debt service obligations, with countries like Nigeria and Pakistan dedicating over 30% of their revenues to interest payments, leading to potential fiscal constraints .
Outlook for 2025
The Institute of International Finance (IIF) projects that public debt levels in emerging markets could increase by more than a third by 2028, approaching $130 trillion, driven by factors such as climate-related spending and infrastructure investments .
However, emerging markets face challenges including rising U.S. Treasury yields, a stronger U.S. dollar, and geopolitical uncertainties, which may impact their borrowing costs and economic stability .
In summary, while emerging markets have experienced substantial growth in debt, they now confront the dual challenge of managing existing obligations and securing sustainable financing amidst a complex global economic landscape.
