Global agencies to work on improving availability of debt data

Tokyo

LEADING economists are warning increasingly of the dangers posed by a global build-up of debt that has occurred, especially in emerging economies, and the debt "mountain" could be even bigger than feared because not all of it is logged in official data.

Much of the debt build-up in Asia and elsewhere has taken the form of foreign currency borrowing, taking advantage of low US dollar interest rates, and memories are still fresh of how severely exposed such borrowing left the region at the time of the Asian financial crisis.

In the hope of remedying the situation, a group of key international agencies agreed at a meeting in Washington last week to cooperate on finding ways to "improve the availability of external and public sector debt data for analysis and policy making".

Hosted by the International Monetary Fund, the meeting also included the Bank for International Settlements, Commonwealth Secretariat, the European Central Bank, Eurostat, the Organisation for Economic Cooperation and Development, UN Conference on Trade and Development and the World Bank.

Concerns among international bodies over the global build-up of debt are focused especially upon corporate borrowers in emerging economies which, in many cases, are exposed to foreign exchange risk. But high levels of domestic debt are also seen as a threat.

Nouriel Roubini, an eminent economist and formerly adviser to the US Treasury and the White House, warned in Tokyo earlier this month that the debt build up and the need for borrowers to "deleverage" is one of a series of factors that threaten to derail global economic recovery.

IMF Financial Counsellor Jose Vinals also warned recently in London that "corporates in emerging markets have been building large debt throughout the period of high commodity prices and ample liquidity conditions. We estimate that corporate and bank balance sheets are saddled with up to US$3.3 trillion in over-borrowing".

As a result, "emerging markets are increasingly vulnerable to financial stress, economic downturn and capital outflows", he said. Around a quarter of outstanding corporate debt in emerging markets is from companies, including quasi-government firms, engaged in the oil and mining sectors, and that is a risk for financial stability, Mr Vinals pointed out.

"Emerging markets have benefited from abundant access to liquidity and strong foreign portfolio inflows, but normalising interest rates in the US and an appreciating dollar have tightened access to external finance and increased the burden of dollar denominated debt," he added.

The Task Force on Finance Statistics (TFFS) meeting in Washington said in a statement that there was a need for "increased inter-agency collaboration to improve data for debt and fiscal risk analysis". It did not quantify or specify where the risks lie, but concerns are believed to be widespread.

At the Washington meeting, the various agencies "agreed on a medium-term strategy to improve external and public sector debt statistics to address data gaps, with the aim to improve data coverage and reduce countries' reporting burdens".

They also discussed "how to further enhance the data sets by covering fiscal risks, including contingent liabilities and net debt".

Louis Marc Ducharme, director of the IMF Statistics Department noted at the meeting that "the importance of the work on debt statistics continues to be reinforced by global developments. Anyone cannot help but to appreciate the need for good debt statistics, both public and external".

Haishan Fu, director of the World Bank's Development Data Group, said meanwhile that the TFFS is "leading the significant improvements in filling gaps in debt statistics through a cooperative and collaborative approach".