Emerging markets in Europe, the Middle East and Africa (EMEA) will together account for the smallest portion (about 5%) of commercial borrowing globally in 2025, despite the region containing the largest number of rated sovereigns (55). Of this, 24 sovereigns are in Sub-Saharan Africa, whose combined gross annual commercial borrowing is similar in size to the larger economies of Poland ($95 billion) or Turkiye ($84 billion); the region's funding requirements vary considerably.

Common through emerging EMEA's sub-regions, however, we expect the average fiscal deficit to reduce over 2025. But at 3.5% of GDP, these imbalances will still continue to prompt significant commercial borrowing.

In some of the region's larger economies, particularly in the Gulf, we expect continued issuance to help fund large economic diversification plans and to develop capital markets. While in less wealthy Sub-Saharan Africa, for whom commercial debt often comes at a high cost, we expect additional concessional bi and multilateral funding.

Although financing conditions could change, these factors, plus debt maturities at a similar level to last year, sit behind our expectation that gross commercial borrowing will be maintained at over US$620 billion. As a result, we expect the total commercial debt stock to exceed US $3.5 trillion by year end.

This year, the largest contributors to gross borrowing expectations relates to the combined reduction in borrowing from Israel and Saudi Arabia and a drop in Polish maturities. On the flip side, we expect higher deficit driven issuance from Egypt, a jump in South African amortization and market development related issuance from Abu Dhabi which (at 3.7% of GDP) we expect will run the highest surplus in the region.

Table 1

2025 Borrowing Expectations Are Concentrated In A Few Key Markets

In aggregate terms, the 55 rated sovereigns we classify as emerging markets in the EMEA region borrow a similar amount of commercial debt as the 29 rated sovereigns in the Americas (excluding the U.S. and Canada). Commercial borrowing in both regions look set to reduce marginally over 2025 and we project the entirety of outstanding commercial debt will be quite similar by the end of the year, close to US$3.5 trillion.

However, Mexico and Brazil's borrowing plans tend to dominate statistics in the Americas--together they make up 70% of our expected 2025 borrowing. While emerging EMEA is slightly less concentrated, the overall picture is typically dominated by patterns in the largest six borrowers, who together account for over 61% of 2025 our expected commercial borrowing; this is down from 65% in 2024.

Chart 1

Also important in our estimates is the average size of expected commercial borrowing. Excluding the largest six borrowers (in chart 1) we expect the average amount will be about US$4.8 billion, with over one-quarter borrowing US$1 billion or less. Compared with the global average estimated borrowing of $40 billion (excluding the U.S. and China) this illustrates a relatively nascent state of economic development and implies some commercial borrowing constraints. The region has the largest stock of concessional lending globally, which mostly comprises Sub-Sharan Africa and Ukraine.

Chart 2

In 2025, the regional outlook is mainly driven by an expected reduction in borrowing by Israel but also to an extent by Saudi Arabia. Both governments borrowed significantly more in 2024 than their longer-run average; at nearly US$60 billion, Saudi Arabia's 2024 borrowing was nearly 80% up on its 10-year average, and at US$75 billion Israel's exceeded the same metric by 110%.

The combined reduction in 2025 projections therefore implies a reversion toward more normal but still-elevated levels of borrowing although the reasons behind each is different. Both projections also contain elements of significant potential variability.

In Israel, we premise our estimates on a reduced fiscal deficit (from 9% to 6% of GDP) and a US$7 billion reduction in maturing debt. Our base case is for expenditure rationalization and tax-rate adjustments--though some uncertainty remains around the passage of these measures through the Knesset. We also acknowledge potential additional conflict-related and defense spending--the primary reason for the still-wide fiscal imbalance. Estimates do not include the potential for post-war reconstruction spending.

We expect Saudi Arabia to borrow slightly less this year because the government ramped up issuances in 2024 to pre-fund part of the 2025 fiscal deficit, and conducted a nearly US$17 billion debt buyback and exchange exercise to extend upcoming maturities in 2025-2026 to 2031-2039. As a result, we expect a lower increase in net borrowing by 0.4% of GDP for 2025 despite a higher projected fiscal deficit.

However, we note that the Saudi government has exceeded its annual borrowing targets (announced at US$37 billion for 2025) in recent years due to slightly wider-than-budgeted deficits and opportunistic issuances to pre-finance future maturities and to build reserves in the central bank. Broadly, we expect Saudi Arabia's borrowing to remain elevated while it progresses its economic transformation policy and projects under Vision 2030. In January, the government issued US$12 billion in eurobonds and will likely issue more external debt over the course of the year, depending on market conditions.

While the country's fiscal revenues have diversified away from hydrocarbon receipts, they remain sensitive to oil price shocks which have the potential to increase borrowing. They also have a strong asset buffer to maintain counter-cyclical policy if required--on a gross basis we expect government debt of about 27% in 2025 and, on a net basis, an asset position in the region of 55% of GDP.

Generally, we expect wealthy Gulf states will take advantage of beneficial borrowing opportunities when required. To this end, we expect Abu Dhabi's issuance to increase by some US$5 billion over 2025, as it seeks to continue developing its domestic market and maintain capital market presence.

Egypt's issuance is projected to increase by nearly US$10 billion from 2024 levels, however this is more explained by Ras El-Hekma related inflows that year, which reduced financing needs. South Africa's US$6.5 billion increase mostly relates to larger maturities.

Some Fiscal Brakes But Debt Still Expanding For Most

S&P Global Ratings projects that EMEA emerging markets will borrow about 3.7% of GDP on a net basis in 2025, similar to the 3.8% of GDP in 2024.

Underneath these figures, we project that the most meaningful fiscal consolidation, at the general government level, will be in Sub-Saharan Africa (SSA) and Central and Eastern Europe (CEE), reducing on average by nearly 0.4 percentage points (ppt) of GDP and just under 0.3 ppt of GDP respectively. Of course, there's a wide range of fiscal trajectories behind those averages; the chart below shows the sovereigns with the greatest projected changes to general government balances in 2025.

Chart 3

Although narrowing deficits contribute to the reduction in gross borrowing in 2025, we still expect the region's long-term commercial debt stock to reach nearly 40% of GDP in 2025, from 37% in 2024. This is the equivalent to over US$3.5 trillion. Moreover, at US$624 billion, 2025 gross long-term commercial borrowing will be almost the same as during the pandemic, which is over 50% higher than the average for the three years prior to 2020.

Somewhat limiting our expectations for commercial debt growth is our view that bilateral and multilateral lending will increase over 2025; this will mostly take the form of concessional loans to SSA sovereigns. The stock of this lending to emerging EMEA has increased sharply in the past few years and we expect it to reach nearly US$722 billion by end-2025.

Ukraine has received a significant portion of this lending over the past few years and we project associated lending will increase to just over US$37 billion in 2025 from US$32.6 billion at end-2024 (see CEE bubble in chart). However, much more prominent in our expectations for 2025 is lending to SSA sovereigns, which we expect will receive about US$8 billion in bi- and multilateral lending, mostly on concessional terms.

Chart 4

For SSA in particular, high debt-service costs and limited revenue-generating capacity both act as borrowing--and rating-- constraints. We estimate the average fiscal revenue base as a proportion of GDP at about 19% in 2025, which is about 10% of GDP lower than the global average. This effectively limits many regional sovereigns' commercial debt-bearing capacity and, relatedly, determines a premium from market-based lenders, leading to a reliance on cheaper funding which can be slower to disburse.

Further, over the past 10 years, SSA's average revenue-to-GDP ratios have declined slightly, highlighting fundamental difficulties in raising revenues from economies with low per-capita incomes and limited foreign investment. Creating some uncertainty for our projections, recent suspensions of foreign assistance by the U.S. could--if not reinstated--lead to further borrowing to cover critical health- and food-related expenditures.

Chart 5

In Nigeria, under the Tinubu administration, a raft of reforms aimed to increase the country's revenue base is underway following measures to remove costly fuel subsidies and liberalize its exchange rate. The latter led to a substantial depreciation of the Naira, and consequently an increase in the country's debt/GDP burden because of a high proportion of foreign currency-denominated debt. However, if expenditure growth is contained, we believe these fiscal reforms will gradually reduce deficits, improving market access and lowering the cost of debt-servicing.

There are a number of other developments in the region. Some 80% of Rwanda's anticipated 2025 borrowing will likely be concessional. Although highly uncertain, we view increasing political pressure from the international community as a factor that could change Rwanda's borrowing parameters. Specifically, the country may face limitations on concessional funding relating to heightened tensions between it and the Democratic Republic of Congo (DR Congo).

Projected at just over 9% 2025, Rwanda has one of the lowest interest-to-revenue burdens which is in-line with the global average, although this ratio could rise if concessional funding is not forthcoming. Kenya, which has one of the higher proportions of commercial debt in SSA, typically borrows externally for general deficit financing (50% of budget).

Chart 6

Maturing Debt Will Likely Be Relatively Steady

Our estimates show that just under US$300 million of long-term commercial debt is due to mature in 2025. This is in line with the annual average over the past three years, although the amount is more than double that maturing a decade ago. Associated rollover ratios for the region have increased to an estimated 8% in 2025 from roughly 6% in 2015.

In South Africa, we expect an uptick in borrowing over 2025. This is mainly as a result of higher amortizations, which are due to increase towards US$10 billion from US$5.7 billion. At the other end of the scale, Poland--the region's largest borrower--will see maturities reduce significantly over the year.

Chart 7

Global Financing Conditions Will Continue To Influence Borrowing

As in the past, our projections on sovereign borrowing in EMEA's emerging economies are highly contingent on developments in the U.S. Treasuries market. We still expect inflation in the U.S. will cool further in the coming months.

As a consequence, we believe the U.S. Federal Reserve could resume its easing cycle at some point this year. That suggests more opportunistic issuance from emerging market EMEA sovereigns than our current projections reflect. Perhaps even more important, demand from international investors for high yielding domestic government bond markets is likely to pick up once the U.S. lowers its policy rate.

The scale of inflows to EMEA's emerging markets will also depend upon repatriation policies, since investors will want to avoid getting trapped in local currency trades, as they did in 2022-2023. In the case of Turkiye, non-resident investors will also be watching whether the Treasury reopens the offshore swaps market after the elections in March 2025--such a move would better enable foreign investors to hedge currency risk.

Appendix: Other Key Borrowings And Ratios

Table 2

Table 3

Table 4

Chart 8

Chart 9

Chart 10

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