Key Points
- Dollar credit grew by 8.5% year-on-year, reaching $14.3 trillion by December 2025.
- Euro credit expanded at an annual rate of 11%, totaling €4.9 trillion.
- Japanese yen credit contracted by 4.9%, marking a decline in its global share.
- Emerging market and developing economies (EMDEs) saw dollar credit rise from $3.2 trillion in 2015 to $4.3 trillion in 2025.
Analysis
The Bank for International Settlements (BIS) has released its global liquidity indicators for the end of December 2025, highlighting a robust expansion in foreign currency credit, particularly in US dollars and euros. Dollar credit outside the United States grew by 8.5% year-on-year, marking the fastest growth rate since Q3 2014, and bringing the total outstanding stock to $14.3 trillion. This growth is indicative of a broader trend where the dollar’s depreciation has spurred increased borrowing in dollar-denominated assets.
Meanwhile, euro-denominated credit also saw impressive growth, expanding at an annual rate of 11% to reach €4.9 trillion, continuing a positive trajectory that has persisted since Q1 2013. In contrast, foreign currency credit in Japanese yen experienced a contraction of 4.9% during 2025, reflecting a decline in its attractiveness as a borrowing currency. The BIS data indicates that the share of dollar credit to emerging market and developing economies (EMDEs) has significantly increased over the past decade, rising from $3.2 trillion at the end of 2015 to $4.3 trillion by the end of 2025.
This represents a 35% increase, showcasing the growing reliance of EMDEs on dollar financing. The growth in euro credit to EMDEs has been even more pronounced, nearly doubling from €437 billion to €858 billion over the same period. This trend underscores the increasing importance of euro-denominated financing in global markets, particularly as European economies recover from the impacts of the COVID-19 pandemic.
The dynamics of dollar credit to EMDEs can be characterized by three distinct phases since the onset of the pandemic: a steady growth phase, a contraction phase due to US monetary tightening, and a recent return to positive growth. Regional variations in dollar credit growth are notable, with Africa and the Middle East experiencing the fastest growth rates, while emerging Asia has seen a divergence from the broader EMDE trend. In contrast, emerging Europe has witnessed a significant acceleration in dollar credit growth during the latest phase.
The overall increase in foreign currency credit reflects a complex interplay of global economic conditions, monetary policies, and the evolving landscape of international finance.
Market Impact
The robust growth in dollar and euro credit is likely to have significant implications for global financial markets. Increased liquidity in these currencies may lead to greater investment opportunities in emerging markets, potentially driving economic growth. However, the contraction in yen credit could signal a shift in investor sentiment away from Japanese assets, impacting the yen’s valuation.
Additionally, the ongoing trends in foreign currency credit may influence central bank policies as they navigate inflation and economic recovery strategies.
Sources
Bank for International Settlements / Credit and Liquidity Statistics