Dubai: The worst of the recession may be over, but the global economy is increasingly wary of high levels of public borrowings in many countries around the world.
Figures obtained by Eur-omonitor International showed that sovereign risk levels have sharply increased worldwide, raising concerns that many governments might fail to meet their financial commitments.
Topping the list is Japan, whose public debt-to-GDP ratio rocketed from 150.7 per cent in 2004 to 183.8 per cent last year.
The second worst-hit economy is Italy, followed by Greece, Singapore and Belgium. Other areas whose debts represented a huge portion of their economic output last year are France, Hungary, Western Europe, Iceland, Portugal, Germany, Rwanda and the United Kingdom.
Although Sri Lanka's debt-to-GDP ratio is the sixth highest in the world, it dropped from 102.3 per cent in 2004 to 80.2 per cent in 2009. Economies whose credit-to-GDP ratios also dropped are Israel, Egypt, Philippines, Canada, Uruguay and Jordan, among others.
Euromonitor said the sovereign risk remains a "serious concern" in many parts of the world. Perceptions of sovereign risk are vital because they can affect the cost at which governments can borrow, and reflect confidence in the business environment.
Falling tax revenues and rising expenditures have caused global sovereign risk to increase sharply.
"High sovereign risk and borrowing is affecting the business environment and consumers. Many governments are imposing sharp cutbacks on spending: for instance reducing welfare benefits, raising taxes and freezing public-sector recruitment or salaries," the report said.
"These are likely to mostly affect advanced economies, whereas emerging countries have lower sovereign risk levels due to more dynamic economic growth... However, higher interest rates still pose a risk to emerging market debt," the report added.
