Emerging markets’ debt dilemma clouds economic recovery
Developing countries grapple with elevated public debt-to-GDP ratios and widening sovereign spreads
EMERGING market countries around the world are confronting a challenging debt dilemma, exacerbated by the confluence of rising US dollar interest rates and economic challenges resulting from the Covid pandemic and Russia’s invasion of Ukraine.
According to Fitch Ratings, a concerning trend has emerged, with a record five Fitch-rated sovereigns being in default. Notably, the period from 2020 to 2022 has witnessed sovereign defaults on average taking longer to resolve.
Since 2019, a significant number of sovereigns have experienced defaults, including Argentina, Belize, Ecuador, Russia, Suriname, Belarus, Lebanon, Ghana, Sri Lanka and Zambia. This surge in defaults reflects the economic strain on countries facing multiple crises, including the pandemic and geopolitical tensions.
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