Who Has the Cushion?
Our latest Net Foreign Asset (NFA) calculations, derived from the External Wealth of Nations (EWN) database, provide a timely and revealing health check on the global economy by mapping cross-border assets against liabilities. The update points to a world contending with large valuation swings alongside a deeper, structural reorganisation of global capital.
Our proprietary NFA Scoring Model places particular emphasis on the Net International Investment Position (NIIP) as a percentage of GDP. This normalised metric strips out currency effects and differences in economic scale, offering a clearer assessment of a country’s underlying external leverage, resilience, and balance-sheet quality.
A pronounced creditor–debtor divide continues to shape the global landscape. The United States has seen its negative NFA position deepen further and is now approaching our lowest 1 Star NFA rating, which denotes net foreign liabilities in excess of 100% of GDP. While this level of external indebtedness is exceptional among major economies, it has so far proven sustainable due to the US’s “exorbitant privilege”. American external assets are skewed toward higher-return foreign equities, while liabilities are dominated by Treasury issuance, allowing the US to service a substantial net liability position without immediate stress.
Conversely, Hong Kong remains an extreme outlier. With an NFA position close to 500% of GDP, it continues to function as a concentrated global wealth and financial intermediation hub and achieves the highest possible NFA score of 7. China, by contrast, sits in the 4 Star bracket. Although its NFA position has improved in absolute terms on the back of a record trade surplus, its NFA-to-GDP ratio remains modest. Cooling foreign direct investment and ongoing property sector headwinds have offset export gains, inhibiting the exponential balance-sheet expansion seen in earlier decades.
Across the Gulf, creditor strength remains dominant. Qatar and the UAE remain firm top-tier creditors, with NFA positions well above 100% of GDP, supported by extensive overseas portfolios and global expansion managed by state-owned entities such as Mubadala and QatarEnergy. Saudi Arabia also maintains a solid positive position, although its ratio has edged lower as capital is increasingly redirected toward domestic Vision 2030 initiatives via the PIF and GACI.
Elsewhere, Kazakhstan stands out as an underappreciated creditor. Its 4 Star ranking, up from 3 Stars, is underpinned by strong commodity exports, the accumulation of offshore assets within the National Fund, and the sustained international debt performance of KazMunayGas.
In Latin America, Chile maintains a slightly negative 4 Star NFA position, supported by the strategic value of Codelco’s copper assets, though it remains exposed to global price volatility. Mexico sits at the 3 Star level, reflecting heavier external liabilities as near-shoring reshapes trade flows, and the sovereign continues to support systemically important state-owned entities such as Pemex and CFE.
For sovereign and quasi-sovereign bond investors, the NFA-to-GDP ratio remains a critical solvency and risk indicator. Strong positive positions signal robust shock-absorption capacity, while persistent deficits highlight contingent liabilities, reserve vulnerability and heightened sensitivity to a stronger US dollar; key considerations in assessing default and funding risk. As The EPIC Fixed Income team have always said, “we prefer to invest in those that can afford to pay us back.”
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