ISLAMABAD, July 16 (Alliance News): A large number of developing countries are facing serious economic difficulties due to the burden of debt burden and dwindling foreign exchange reserves.
Lebanon, Sri Lanka, Russia, Suriname and Zambia are already facing bankruptcy, Belarus is on the brink and at least a dozen more are at risk as debt continues to rise, foreign media reported. Spending and inflation are raising fears of economic collapse.
Analysts hope that many countries can still avoid bankruptcy, especially if global markets remain favorable and the IMF supports them, but these are the countries that are currently at risk.
Argentina: Argentina’s currency, the peso, is now trading at a discount of about 50 percent on the black market, the country’s reserves are extremely low and bonds trade at just 20 cents on the dollar due to its 2020 debt restructuring. The latter is less than half.
The government has no significant debt outstanding until 2024, but it will increase after that and there have been fears that powerful Vice President Cristina Fernandez de Kirchner may withdraw from the International Monetary Fund deal.
The crisis will come in September when $1.2 billion in bond payments are due, bailout money and reserves mean Kyiv could potentially pay, but this week Ukraine’s largest oil and gas state-owned The company ‘Naftogaz’ called for a 2-year loan freeze, which investors doubt the government will comply with.
Tunisia: There are many African countries that go to the IMF, but among them, Tunisia seems to be in the most danger, in the presence of a huge budget deficit of around 10%, there are also fears that President Qais Saeed will abdicate his authority. And getting or at least holding on to the IMF program could be difficult to strengthen its grip on the country’s powerful labor unions.
Ghana: Continued borrowing has pushed Ghana’s debt-to-GDP ratio to around 85 percent, its currency, the cedi, has lost nearly a quarter of its value this year and is already on top of debt interest payments. Tax was spending more than half of the revenue while inflation has also reached close to 30 percent.
Fund firm FIM Partners estimates that Egypt has $100 billion in hard currency debt due over the next five years, including $3.3 billion in bonds due in 2024.
Egypt’s pound depreciated by 15 percent and asked for help from the IMF in March, but bond spreads are now more than 1,200 basis points.
Kenya: Kenya spends about 30 percent of its revenues on interest payments, its bonds have lost about half their value and it currently has no access to capital markets.
Moody’s David Rogovic said of Kenya, Egypt, Tunisia and Ghana, “These countries are most at risk due to the size of debt relative to reserves and fiscal challenges in consolidating debt burdens.”
Ethiopia: Ethiopia plans to be one of the first countries to receive debt relief under the ‘G-20 Common Framework Programme’.
Progress has been halted by the country’s ongoing civil war, but in the meantime it continues to repay its one billion dollar international bond.
Pakistan: Pakistan reached a landmark deal with the IMF this week, a timely development as high energy import prices push the country to the brink of a balance of payments crisis.
Foreign currency reserves have fallen to $9.8 billion, barely enough for five weeks of imports, while the Pakistani rupee has hit a record low.
The new government now needs to cut spending sharply, which spends 40 percent of its revenue on interest payments.
Belarus: Western sanctions pushed Russia into bankruptcy last month, and Belarus now faces the same sanctions as it stands with Russia in the Ukraine conflict.