Since the global financial crisis, EMDE fiscal positions have weakened. In part, this reflected sharp growth slowdowns that pushed government debt up by an average of 15 percentage points of GDP to 51 percent of GDP by 2018. This deterioration was broadbased—by 2018, government debt was higher than in 2007 in more than 70 percent of EMDEs (Figure 1.C). In LICs, government debt rose by 4 percentage points of GDP, to 45 percent of GDP in 2018 after falling to a trough of 31 percent of GDP in 2012. The share of EMDEs and LICs with fiscal deficits also increased by 20 and 7 percentage points, respectively, to 76 and 79 percent in 2018 (Figure 1.D).

The post-crisis fiscal deterioration was particularly pronounced in commodity-exporting EMDEs, which account for almost two-thirds of EMDEs. During 2011-16, almost all commodity prices collapsed. Oil prices fell by two-thirds, industrial metals prices by onehalf and agricultural prices by one-third amid slowing commodity demand growth and ample supply (World Bank 2015, 2018b). The commodity price slide caused sharp growth slowdowns and losses in government revenues in commodity-exporting EMDEs. As a result, fiscal deficits of these EMDEs widened by 5 percentage points of GDP between 2010 and 2016 to 6 percent of GDP. Despite some improvements since then, they have not yet returned to balance. Although mostly from low levels, government debt in commodity-exporting EMDEs has risen by 15 percentage points of GDP since 2010, to 46 percent of GDP in 2018. In commodity-importing EMDEs, government debt increased more moderately (by 10 percentage points of GDP) to 53 percent of GDP in 2018 amid generally robust growth in those economies.

Since the crisis, the financing of debt has shifted towards higher-risk sources in many EMDEs, including debt held by nonresidents, issued on non-concessional terms, or at shorter maturity (Figure 1.E and 1.F). Debt held by nonresidents and denominated in foreign currency accounted for about 50 percent of government debt in the median EMDE in 2018, making these countries more vulnerable to a deterioration in global investor sentiment and exchange rate risk. As a result, sovereign ratings have been downgraded for many EMDEs, and 40 percent of LICs are now classified as at high risk of debt distress (World Bank 2019). The composition of this LIC debt has become increasingly nonconcessional as they have accessed capital markets and borrowed from non-Paris Club creditors (World Bank 2018a, 2019).

Whereas, in most advanced economies, the private sector has deleveraged since the global financial crisis, private sector debt has risen in EMDEs in tandem with mounting government debt. As a result, total debt—consisting of government and private debt—in EMDEs has risen to a record high of almost 170 percent of GDP in 2018, from 96 percent of GDP in 2007 (Borensztein and Ye 2018; World Bank 2018b). Even excluding China, where corporate debt has soared post-crisis, other EMDEs’ total debt has risen to a nearrecord 108 percent of GDP in 2018, from 82 percent of GDP in 2007. Total debt in LICs also increased from 53 percent of GDP in 2007 to 65 percent of GDP in 2018. Private debt accounted for more than one-half of total debt in EMDEs excluding China in 2018 and one-third in LICs.

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