Emerging Markets Face a New Debt Crisis; Chinese Lending Is Not the Only Cause

The developing world could be heading towards a new debt crisis. Public debt in emerging markets now averages 50 per cent of gross domestic product, the highest level since the 1980s. More than 80 per cent of developing countries have increased their public debt in the past five years, the Financial Times reported in a commentary. The number of developing countries whose public debt level is rated as “unsustainable” or “high-risk” is now 32, more than double the number in 2013. Most of the media’s attention has focused on Chinese loans that add to developing country debts. But China is not the only lender contributing to the looming crisis: the majority of new loans to at-risk, low-income and lower-middle-income countries have come from other sources, including other countries and multilateral institutions such as the World Bank and regional development banks. If a debt crisis is to be averted, developing country governments and all lenders — including China, but also the World Bank and others — must come together and act now to bring debt levels under control. Read more