(Adds detail on calculation)
LONDON, Oct 8 (Reuters) – Frontier market debt surged to a new record of 121% of GDP in the second quarter as governments scrambled to borrow to aid their recovery from the coronavirus pandemic.
The figure, a GDP-weighted average, rose 6 percentage points in the first half of the year, fuelled by a sharp increase in government debt to $1.4 trillion in the second quarter, said the Institute of International Finance (IIF).
A frontier market is a developing economy that is considered smaller and riskier than an emerging market economy.
The IIF surveyed 29 countries, debt ratios in 26 of the countries rose over the past year, led by Bahrain, Oman, Peru and El Salvador, the IIF said in a report.
In contrast, the Republic of Congo, Dominican Republic and Kazakhstan had cut debt ratios, it said.
“As the impact of the COVID-19 pandemic continues to hit the global economy and portfolio flows to emerging markets, existing macroeconomic and social vulnerabilities have been exacerbated,” IIF associate economist Khadija Mahmood wrote in the report.
“Lower commodity prices and weak trade and tourism revenues have also hurt. These adverse conditions have pushed global debt ratios to new records.”
Near zero interest rates, quantitative easing and more than $15 trillion in fiscal stimulus globally, including about $17 billion in frontier markets is putting rising debt levels for the asset class under increased scrutiny, the IIF said.
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