Energy subsidies rise to $1.65 trillion

Energy subsidies are expected to reach $1.65 trillion by the end of the year, calculated by the credit rating agency S&P Global, forecasting that new government debt will be 40 percent higher than the pre-pandemic average.

When pandemic spending is included, this year’s amount in 137 countries whose debt S&P Global assesses rises to $10 trillion, and total debt to $65 trillion, the agency calculated.

The agency predicts that these countries will borrow $10.5 trillion this year, which is 40 percent more than the pre-pandemic average. However, new debt still lags behind the record of $11.5 trillion.

– The largest increases in debt will occur in Europe and Latin America, given the stagnation of the economy and budgetary pressures, including high energy prices – S&P Global announced on Thursday.

Europe is preparing to issue bonds amounting to about $1.75 trillion, while the US and Japan will maintain their positions as the largest ‘debtors’, with shares of 36 and 17 percent of total global debt, respectively.

Expressed as a share of global GDP, debt will rise to 66 percent this year, up from 64 percent in 2022. At the peak of the pandemic, it was 74 percent of GDP.

The agency warns, however, that debt is increasing in an environment of sharply rising interest rates, meaning that governments of developed countries will borrow at approximately double the cost compared to 12 months ago.

The borrowing costs for developing countries are also approaching the highest levels in over a decade, and since bonds from emerging economies typically have shorter maturities, many have quickly faced higher borrowing costs.

– High interest rates pose a significant risk for highly indebted countries that largely borrow in foreign currency – emphasizes S&P Global, adding that a ‘significant number’ of countries with a credit rating of ‘B’ or lower face a high risk of repayment problems.