Global gov’t borrowing to hit record USD 12.3 tn in 2025 -S&P Global

Global government borrowing is on track to hit a record USD 12.3 tn in 2025, driven by rising defense spending, higher debt-servicing costs, and ongoing fiscal pressures, S&P Global forecasts. Total sovereign debt stock is expected to reach USD 76.9 tn, with global debt levels at 70.2% of GDP — slightly below pandemic highs but still elevated at a time when economies are forced to reckon with “crisis after crisis,” the Financial Times quotes Roberto Sifon-Arevalo, global head of sovereigns at S&P, as saying.

Top borrowers: The US is set to issue nearly USD 4.9 tn in long-term debt this year, driven by “wide fiscal deficits, high interest spending, and substantial debt refinancing requirements.” While the USD’s reserve currency status gives the country “significant flexibility” to manage its debt, S&P’s Roberto Sifon-Arevalo warned that rising borrowing costs are making that harder. It “was fine and sustainable… before the pandemic, now it presents a much bigger problem,” he said.

China, the second-largest borrower, is increasing issuance by over USD 370 bn to USD 2.1 tn to support its struggling economy. Outside the G7 and China, global borrowing is expected to remain broadly stable, S&P said.

Investor concerns are growing, with bond giant Pimco planning to cut exposure to long-dated US debt over “debt sustainability questions,” while b’naire investor Ray Dalio has warned the UK could fall into a “debt death spiral” as borrowing outpaces confidence.

Bigger fiscal risks: As debt-servicing costs climb, governments face increasing constraints on infrastructure and social spending, fueling a global shift toward more fiscally conservative political movements, Sifon-Arevalo is quoted as saying.

ALSO WORTH KNOWING ON PLANET FINANCE-

Saudi Aramco cut its 4Q 2024 dividend — the world’s biggest dividend — to SAR 80.1 bn (USD 21.4 bn), a 31% y-o-y cut and well below the analyst expectation of a stable payout of SAR 116.5 bn (USD 31.1 bn), according to a disclosure to Tadawul. This includes a SAR 79.3 bn (USD 21.14 bn) base dividend, up 4.2%, and a performance-linked dividend of just SAR 0.82 bn (USD 0.22 bn), down 98%.

Aramco will slash its 2025 dividend to SAR 320.4 bn (USD 85.4 bn), from USD 124 bn, citing financial strain from high payouts and weak oil prices, Bloomberg reports.

The dividend cut comes as Saudi Arabia looks to recalibrate spending as it faces rising bills for gigaprojects like Neom. The Kingdom’s budget deficit is expected to widen 4% of GDP from 2.8% in 2024, Reuters quotes Abu Dhabi Commercial Bank Chief Economist Monica Malik as saying.

Market reax: Saudi Aramco’s shares dipped 2% on the news to SAR 26.85, their lowest since August 2024. Aramco’s market value stands at USD 1.74 tn, making it the world’s sixth-most valuable company, behind Apple, Microsoft, Nvidia, Amazon, and Google parent firm Alphabet.

MARKETS THIS MORNING-

Asian markets are mostly in the green this morning, after China set its GDP growth forecast at 5%. Mainland China’s CSI 3000 Index rose 0.1%, while Hong Kong’s Hang Seng is up 0.3%. On the other hand, Japan’s Nikkei and Topix are both down in early trading. Over on Wall Street, futures rose slightly after another day of losses, with the Nasdaq inching dangerously close to correction territory.

THE CLOSING BELL-

The ADX rose 0.3% yesterday on turnover of AED 1.1 bn. The index is up 1.8% YTD.

In the green: Abu Dhabi National Takaful Co. (+14.9%), Aram Group (+4.3%) and Rak Ceramics (+3.2%).

In the red: Sharjah Islamic Bank (-4.0%), Space42 (-2.4%) and Apex Investment (-2.0%).

Over on the DFM, the index rose 0.5% on turnover of AED 774.6 m. Nasdaq Dubai was up 0.8%, and 6.1% YTD.

CORPORATE ACTIONS-

Dubai’s toll operator Salik’s board of directors has proposed an AED 619.8 mn dividend payout for 2H 2024, equivalent to 8.26 fils per share, according to its financials (pdf). This brings total distributions for FY 2024 to AED 1.2 bn, representing 100% of net income and marking a 6.1% y-o-y increase.

Emirates Ins. has signed an AED 140.9 mn share buyback agreement with its shareholder, Mamoura Diversified Global Holding, to acquire its 17.7 mn shares in EIC, representing an 11.81% stake, according to an ADX disclosure (pdf). The company will then re-distribute these shares to the remaining shareholders on a pro-rata basis.

What’s next? EIC has secured the necessary regulatory approvals, with the transaction awaiting final shareholder approval at the upcoming general assembly on 25 March. The transaction will reduce the company’s assets and general reserves by AED 141 mn each.