Sep 22, 2015 (LBO) –Corporations in Indonesia, Sri Lanka, and Vietnam have the highest share of foreign currency debt in developing Asia, the Asian Development Bank said in a report.
“Firms in the energy sector tend to have a substantial portion of their borrowings in foreign currency,” ADB said in its report.
“Typically, the corporations that have a high share of foreign debt are also highly leveraged. This heightens their exposure to the impacts of US dollar appreciation.”
ADB says 69 percent of firms in the sample (by asset value) that have forex debt in Vietnam did not report any forex revenues while 48 firms in Sri Lanka did the same.
The value of foreign currency bonds outstanding, had reached 725 billion US dollars in 2015, up from 242 billion dollars in 2014,data showed.
“Corporations’ large foreign currency exposure could put the home economy at risk of balance sheet effects from local currency depreciation,” ADB says.
“This creates a dilemma for policy makers,” it said.
“While local currency depreciation can make exporting economies more competitive, it can also stress those with weak financial systems.”