In the first half of 2019, the debt of emerging countries hit a new record of $71,400 billion, making 220% of the group’s GDP. China, which is still regarded as an emerging market, accounts for a big share of this debt. The data was revealed in a recent report by the Washington-based Institute of International Finance (IIF) that tracks global macroeconomic developments.

Debt generated by non-financial corporate sector reached 99.5% of GDP; this is a worrying position in a world where growth is now sluggish and supported by strong government involvement. In Africa, Ghana and Kenya are also in bad positions as their governments' debt burden continues to grow and has exceeded 60% of GDP. In Kenya, the government has changed the way its debt sustainability is calculated and has set a threshold amount not to be exceeded while the Ghanaian government still plans to borrow up to $5 billion from international investors in 2020.

Egypt remains the emerging country in Africa where debt-to-GDP ratio is the highest. Debt rate in the country was 88% at the end of the first half of 2019, but still down from the same period in 2018 (97.3%). Although facing tough times, South Africa continues to keep its public debt in check, a significant proportion of this burden is denominated in local currency. Apart from South Africa, the debt of non-financial companies in emerging African countries remains very low. IFF estimates that global debt is on track to break a new record at the end of this year 2019, and could reach $255,000 billion. Africa, which is very often blamed for its debt, has the lowest stock.

The investment community continues to view developed country bonds as good investments. But the difficulty in obtaining growth points and the strong increase in interest-free borrowing are signs that a paradigm shift is needed in the allocation of international financial resources.

Idriss Linge