S&P predicts global long-term sovereign borrowing to reach $11.5 trillion in 2024

Standard & Poor’s, the credit ratings agency, has projected that global long-term sovereign borrowing for the 137 countries it rates will reach $11.5 trillion in 2024. This figure represents more than 50% of pre-pandemic levels and reflects an 8% increase from 2023. The surge in sovereign debt levels coincides with several factors, including weak global GDP growth, busy election schedules worldwide, and the rise in interest rates and defense spending in developed nations.

In its report, Standard & Poor’s highlighted that the United States will lead the global long-term debt issuances, accounting for 39% of the total with a borrowing increase of $1 trillion to reach $4.5 trillion in 2024, reports Al-Qabas daily.

This substantial increase is attributed to the slowdown in US economic growth and the challenges of managing financial conditions.

Moreover, China is expected to surpass Japan as the second-largest sovereign issuer of debt, with total global long-term issuance reaching $1.7 trillion. This shift reflects Beijing’s efforts to support its economy amid various challenges.

Among other major sovereign borrowers, the G7 countries are anticipated to maintain stable borrowing levels in 2024, except for the UK, which is projected to increase borrowing by 28% to around $350 billion.

Standard & Poor’s predicts that despite potential peaks in borrowing costs, the actual debt service rates will remain elevated compared to pre-pandemic levels due to larger government debt stocks. The agency forecasts the global stock of commercial sovereign debt to reach a record $71 trillion by 2024, with G7 countries contributing around 65% of the total.

In the Asia-Pacific region, sovereign borrowing is expected to stabilize in 2024, with governments borrowing about $3.9 trillion, slightly lower than the previous year. India is projected to maintain borrowing at $278 trillion, while China’s borrowing is set to increase by 7% to $1.7 trillion.

Standard & Poor’s anticipates that emerging markets with robust sovereign funds may benefit from favorable financing conditions, driven by monetary tightening in several emerging markets and expected monetary easing in major developed economies. This could lead to lower borrowing costs for emerging markets.

Furthermore, the issuance of sustainable sovereign bonds is expected to slightly decrease in 2024 compared to the previous year, which saw a historic high of $136 billion. However, sustainable sovereign bonds remain an essential avenue for financing environmental, social and governance initiatives amidst ongoing fiscal challenges globally.

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