UK faces highest debt interest bill among developed nations this year

LONDON, United Kingdom - The United Kingdom (UK) is facing the highest debt interest costs among developed nations this year, primarily due to its significant proportion of inflation-linked debt, Anadolu Agency (AA) quoted the Fitch Ratings as saying Tuesday.

It forecasts that Britain will allocate 10.4 per cent of its total government revenue to service its debts in 2023, amounting to a substantial £110 billion (US$141.9 billion).

Interest payments on a 12-month basis reached £117 billion in May 2023, twice the level in the period to September 2021.

This surge in interest costs can be attributed to the considerable share of inflation-linked debt in the UK, said the global rating agency.

Despite the government debt having a long average maturity, the prevalence of inflation-linked bonds has accelerated the pass-through from inflation to interest expenses.

Notably, inflation index-linked debt accounted for nearly 25 per cent of the UK government's debt stock in 2023, far exceeding the figures for other major economies within the G-7.

For comparison, Italy, the second-largest issuer of inflation-linked debt in the G-7, had just 12 per cent, while France was the only other member with a level of over 10 per cent.

- BERNAMA