Rich nations now spend more on debt than defense -OECD

Sovereign debt markets face a “difficult outlook” in 2025, as countries continue to race to refinance existing debt amid higher bond yields and higher interest rates, the Organisation for Economic Co-operation and Development (OECD) warned in its latest Global Debt Report (pdf). Interest payments across the 38 OECD member countries hit 3.3% of GDP in 2024 — up from 3.0% in 2023 and reaching the highest level since at least 2007—surpassing the 2.4% spent on military budgets.

Governments are continuing to borrow to plug the gap: Governments and companies borrowed USD 25 tn globally from markets in 2024, nearly triple the amount in 2007, the report added. This is set to continue to rise this year, with governments alone forecasted to issue USD 17 tn in sovereign debt, up from USD 16 tn last year. Nearly half of all OECD sovereign debt will mature by 2027, a refinancing cliff that risks squeezing fiscal space as yields climb and investment needs surge.

The US saw a sharp rise in interest payments, rising to 4.7% of GDP, followed by Italy at 4.1% and the UK at 2.9% and France at 2.1%. Germany recorded the lowest burden, at just 1%.

The fix: With much of the past two decades’ borrowing used to recover from the 2008 financial crisis and the covid-19 pandemic, “now there are needs to shift from recovery to investment” on projects like infrastructure and climate, OECD Director for Financial and Enterprise Affairs Carmine Di Noia told the Financial Times. “Borrowing must increase growth” to help stabilize debt-to-GDP ratios.

Adding pressure, central banks are stepping back from debt markets. Their holdings have fallen by USD 3 tn since their 2021 peak, with another USD 1 tn drop expected this year. The shift toward “more price sensitive” private investors leaves governments more exposed to “heightened geopolitical and macroeconomic uncertainty,” Di Noia said.

MARKETS THIS MORNING-

Asian markets are — like Wall Street — cheering signs that US President Donald Trump’s planned tariffs might not be as severe as initially expected. Japan’s benchmark Nikkei is up 0.8%, while South Korea’s Kospi is up nearly 0.2%. China was the only outlier — with the CSI 300 trading flat and Hong Kong’s Hang Seng falling 1.06%.

Wall Street futures edged down only slightly, after all three major indices closed up yesterday.

THE CLOSING BELL-

The DFM fell 0.9% yesterday on turnover of AED 519 mn. The index is down 0.9% YTD.

In the green: Dubai National Ins. & Reins. (+14.9%), Gulf Navigation Holding (+9.3%) and National Cement (+3.1%).

In the red: Al Salam Bank (-6.4%), Commercial Bank of Dubai (-3.4%) and Emirates Reem Investments (-3.2%).

The ADX remained flat yesterday on turnover of AED 963 mn. Nasdaq Dubai was up 0.2%, and up 1.0% YTD.

CORPORATE ACTIONS-

Adnoc Gas’ shareholders have approved a dividend payout of USD 3.4 bn for 2024, marking the largest payout of an ADX issuer for the year with a 19% total return, according to an ADX disclosure (pdf). The company will distribute USD 1.71 bn in dividends for 2H 2024 in 2Q 2025. It also anticipates inclusion in the MSCI and FTSE emerging market indices in 2025, following the USD 2.8 bn sale of a 4% stake in the company, which resulted in an 80% increase in freefloat shares.

RAK Ceramics will distribute AED 99.4 mn in dividends for 2H 2024 after its general assembly cleared the move, it said in a disclosure (pdf) to the ADX. The same figure was distributed for 1H 2024, bringing the total dividend distribution for 2024 to AED 198.7 mn.

Agility Global’s general assembly approved the purchase of up to 1 bn of company shares to partially fund standard operating procedures, it said in a disclosure (pdf) to the ADX. The purchase price was set between AED 0.5 and AED 5 per share.