Agence France Presse

Singapore, February 14:

Asia-Pacific governments led by Japan are expected to borrow more than $2.0 trillion in long- and medium-term debt in 2005, Standard and Poor’s (S&P) said today.

This would bring the total sovereign outstanding debt in the region to more than $10 trillion, with more than 80 per cent of the new borrowings issued domestically in Japan, the global credit watchdog said in a statement.

New debt issues with initial maturities of more than one year are forecast to be about $170 billion higher this year, representing nine per cent growth compared to 2004, when they grew by 20 per cent.

S&P, which rates 18 government borrowers in the region, stressed that 2004 debt growth was skewed by the weakening of the US dollar. “Issuance remains robust in 2005 as governments take advantage of a still relatively benign interest rate environment, improved credit fundamentals and tight spreads over US treasuries,” credit analyst Brendan Flynn said. By the end of 2005, Japan alone is projected to account for 83 per cent of total Asia-Pacific gross outstanding debt.

“Given Japan’s dominance, the majority of new long- and medium-term debt to be issued in 2005 will be in the AA category,” said another SP analyst, Takahira Ogawa.

Excluding Japan, regional governments will issue some $370 billion in debt this year, bringing the total outstanding to $1.8 trillion, mostly in local currency and inflation-linked borrowings, SP said. S&P noted the increasing popularity of Islamic bond issues in the region. Only the Philippines sources a significant portion of its stock of outstanding debt in foreign currency, resulting in a large foreign portfolio of more than $30 billion, SP noted.