LONDON
The UK is facing the highest debt interest costs among developed nations this year, primarily due to its significant proportion of inflation-linked debt, Fitch Ratings said Tuesday.
It forecasts that Britain will allocate 10.4% of its total government revenue to service its debts in 2023, amounting to a substantial £110 billion ($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 ratings 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% 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%, while France was the only other member with a level of over 10%.
