• In the 90s many Emerging Markets (EMs) had a lot of dollar-denominated debt backed by local-currency revenues
  • Much of this dollar-denominated debt has been replaced by local-currency debt.
  • The chart below from Nomura shows foreign currency debt – banks loans and bonds – as a percentage of GDP for what are identified as troubled currencies and more robust ones, comparing levels in 1996, 2007 and September 2013.
  • Many of these countries are in decent shape but the statistics can be misleading.
  • On average, the two groups have more foreign currency debt today than they did just before the 1997 Asian crisis.