| NEW YORK
NEW YORK Feb 27 Sovereign debt borrowing is
expected to rise by 2.7 percent to $7.1 trillion this year, with
the biggest relative increase coming in sub-Saharan Africa, a
new study by Standard & Poor's showed on Thursday.
The increase in long-term debt borrowing, equivalent to $185
billion, will be led mainly by the United States and Japan,
which will account for 57 percent of the total in 2014. The next
biggest sovereign borrowers this year are projected to be Italy,
China and Brazil.
Overall debt levels of long-term commercial debt by
sovereigns that hold a credit rating will reach an equivalent of
$44.7 trillion by the end of 2014, S&P said. Short-term
commercial debt levels, those that have maturities of a year or
less, are expected to hold steady at $5.3 trillion.
"Approximately 61 percent, or $4.4 trillion of the
sovereigns' gross borrowing will be to refinance maturing
long-term debt, resulting in an estimated net borrowing
requirement of $2.8 trillion," S&P said.
By far, the region with the biggest increase in net
long-term borrowing is sub-Saharan Africa (SSA). Sovereigns in
the region are expected to boost borrowing for the year by 49
percent to $61 billion over the prior year.
However S&P believes the vast majority of that borrowing,
$48 billion, will be done in local currency-denominated bonds.
A little more than a quarter of the total amount borrowed in
SSA will be put toward refinancing maturing debt, with the total
commercial debt stock reaching $315 billion by year-end.
S&P highlighted an increasing number SSA nations coming to
the market, but also gave a warning.
"We nevertheless expect that conditions for issuance in 2014
will become less favorable this year because U.S. Federal
Reserve tapering may make emerging market issuance less
attractive. However, frontier markets have fared better than
major emerging markets and this trend is likely to continue in
2014," S&P said.
Emerging market sovereign debt issuance is expected to
increase by just $2 billion to $614 billion. That is a rise of
0.3 percent over 2013 for the 17 nations included in the
benchmark JPMorgan EMBI+ index.
Total debt stock from the sector will then reach $2.8
trillion by the end of 2014, S&P projects.
The biggest roll-over ratios are in Hungary and Croatia,
which includes short-term debt, at 20 percent and 16 percent of
gross domestic product, respectively.
Brazil, the largest EM borrower, making up 44 percent of the
total, is expected to show a modest decline year-over-year to
$272.9 billion from $280.8 billion in 2013.
The Middle East and North Africa region is expected to
increase its borrowing by 27 percent to $56 billion this year.
The Asia-Pacific region, due to Japan's dominance, is
forecast to increase issuance by 4.9 percent to $2.5 trillion.
Japan accounts for over $1.8 trillion of that borrowing.
Borrowing by the Commonwealth of Independent States is
forecast to decline by 10 percent to $51 billion. Out of that
debt, $41 billion is expected to issued in local currency.
Russia, the largest economy in the region, is expected to
issue the most debt, $38.7 billion. Of that amount, 80 percent
is expected to be issued in rubles.
Even with borrowing down in 2014, absolute debt levels in
the CIS are seen rising by $28 billion to $281 billion.
Ukraine, before its pro-Russian President Viktor Yanukovich
was ousted last weekend, faced a precarious fiscal position.
Moscow offered $15 billion in financing to help Kiev pay its
debts. The offer was seen as a prize for turning away from
forming stronger trade ties with the European Union in November.
S&P said the decline in annual borrowing in the CIS "owes
largely to our expectations that the majority of Ukraine's
borrowing needs (over 70 percent, compared with 16 percent in
2013) will have to be covered by official debt."
"In our view, without official financial assistance, Ukraine
will not be able to meet its debt service in a timely manner in
2014," S&P said.