Asia-Pacific Sovereigns Debt May Rise 4.7% in 2015: S&P

Mumbai: The stock of commercial debt from Asia-Pacific sovereigns is likely to rise 4.7 per cent, or by $2.6 trillion, from last year to touch $16.7 trillion by the end of the year, a report by Standard & Poor's Ratings Services said.

However, India, the third largest borrower in the region, will not add any incremental debt this year and is likely to retain its share at 8.7 per cent of the total.

"New Delhi's borrowing is likely to stabilise at 8.7 per cent as growth of debt issuance slows markedly with continued fiscal consolidation in the year," it said.

'Asia-Pacific sovereign debt report 2015' also said that the 21 Asia-Pacific sovereigns which it rates will borrow an equivalent of $2.6 trillion from long-term commercial sources this year, to reach $16.7 trillion.

This $2.6 trillion in new debt would be on par with long-term commercial debt issuance from 2014, as declines in Japanese and Australian borrowings offset increases elsewhere, said the agency's credit analyst Kim Eng Tan.

"Some 63 per cent of the sovereigns' gross long-term commercial borrowings will be for refinancing maturing debt, resulting in estimated net borrowings of $943 billion," Tan said, adding that together with the bilateral and multilateral debt, the total stock will reach $16.7 trillion - a year-on-year jump of $744 billion or 4.5 per cent.

Out of the fresh debt sales, the agency projects the share of 'AAA' commercial sovereign debt will be close to 4.1 per cent, while 'BBB' debt and below this is set to account for about 10 per cent.

Including borrowings from bilateral and multilateral official lenders, the overall long-term borrowing could be $2.7 trillion. The share of noncommercial official debt (bilateral and multilateral) in total long-term sovereign debt is set to remain at 1.7 per cent - little changed from the past two years.

According to the agency, Pakistan and Japan will face the highest debt-rollover ratios reaching 25 per cent and 75 per cent of GDP this year, respectively, Tan said.

Given that Japan has the largest outstanding debt in the entire region, it estimates the outstanding commercial debt issued by Japan will amount to approximately 70 per cent of the region's total in 2015.

Japan will account for 63 per cent of this year's long-term commercial borrowing by governments in the region, Tan said, adding, "Tokyo is aware of the refinancing risk of its large debt stock, as reflected by the rollover ratio mentioned above. It has been gradually extending the maturity of its outstanding debt."

However, with the improving Japanese fiscal deficit over the past two years, its borrowing is likely to decline in absolute level again this year.

Partly as a result of that, China, the second largest borrower in the region, will see an increase in its share of commercial borrowing to 12.7 per cent this year from 10.5 per cent in 2014.

Another reason for China's larger share of borrowing is its decision to widen its fiscal deficit this year to support growth as it pushes structural reforms to re-balance its economy.