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Moody's warns on risk from growing external debt in emerging markets

Total emerging and frontier market external debt jumped to$8.2 trillion at year-end 2015 from $3.0 trillion in 2005, a build-up that ismaking some economies "increasingly vulnerable to external shocks,"according to Moody's.

The rating agency said that the increase in debt is due tothe increase in private debt, which has grown at an annual rate of 14.3% since2005.

Brazil and Mexico had the fastest-growing external debtvolumes in Latin America, the rating agency said in a July 20 report.

Brazil's external debt-to-GDP ratio has grown to 38% in 2015from 22% in 2005, faster than any other country in the region. The ratio isexpected to grow if the country's economy shrinks further.

"While sovereign debt profiles have improved, theincrease in private sector debt is making sovereigns more vulnerable tocontingent liabilities," Elena Duggar, an associate managing director atMoody's, said in a statement.

The rating agency warned that the debt situation in emergingeconomies could worsen further amid weak global economic growth prospects andlow commodity prices. "The potential for capital flows to slow, shouldU.S. interest rates continue to rise, would also exacerbate the debt situationin emerging economies," it added.