The big default? The dozen countries in the danger zone

LONDON: Traditional debt crisis with signs of currency collapse, 1,000 basis points bond spread and burned foreign exchange reserves show a record number of developing nations are currently struggling .
Lebanon, Sri Lanka, Russia, Suriname and Zambia have defaulted, Belarus is on the brink and at least a dozen other countries are in the danger zone as rising borrowing costs, inflation and debt fuel concerns. about the economic collapse.
Total cost is eye repair. Using a 1,000 basis point bond spread as a pain threshold, analysts calculate $400 billion in debt in progress. By far, Argentina has the most with more than 150 billion USD, while Ecuador and Egypt are behind with 40 billion – 45 billion USD.
Crisis veterans hope many can still avoid default, especially if global markets calm and IMF supported, but these are countries at risk.
The sovereign default world record holder looks set to add to his tally. The peso currently trades at a discount of nearly 50% on the black market, reserves are very low, and bonds trade at just 20 cents in dollar terms – less than half their post-reconstruction value. debt structure in 2020 of the country.
The government doesn’t have any significant debt to pay off until 2024, but it grows after that and concerns have crept in that powerful vice-president Cristina Fernandez de Kirchner could push to abandon the Money Fund. International currency.
Russia’s invasion means Ukraine will almost certainly have to restructure $20 billion plus debt, heavy investors like Morgan Stanley and Amundi warned.
The crisis hit in September when $1.2 billion in bond payments came due. Aid and reserve money means Kyiv ability to pay. But with state-run Naftogaz this week asking for a two-year debt freeze, investors doubt the government will follow through.
Africa has a wide range of countries that will join the IMF but Tunisia looks to be one of the most at risk.
The budget deficit is close to 10%, one of the highest public sector wage bills in the world, and there are concerns that securing, or at least complying, an IMF program could be difficult. pushed by President Kais Saied to consolidate his power and the country’s powerful, nefarious labor union.
The spread on Tunisian bonds – which senior investors demand to buy debt rather than US bonds – has widened to more than 2,800 basis points, and along with Ukraine and El Salvador, Tunisia is on the list of three countries most likely to default. Morgan Stanley’s top debt. “An agreement with the International Monetary Fund becomes urgent”, the head of the central bank of Tunisia Marouan Abassi said.
Borrowing frenzy has sent Ghana’s debt-to-GDP ratio skyrocketing to nearly 85%. Its currency, cedi, has lost almost a quarter of its value this year, and it has spent more than half of its tax revenue on interest payments. Inflation is also close to 30%.
Egypt has a debt-to-GDP ratio of nearly 95% and has seen one of the biggest international cash outflows this year – around $11 billion according to JP Morgan.
Funding firm FIM Partners estimates Egypt has $100 billion in foreign currency debt to be paid over the next five years, including $3.3 billion in bonds by 2024.
Cairo devalued the pound by 15% and asked the IMF for help in March but the bond spread is now above 1,200 basis points and the credit-debt swap (CDS) – an investor tool to hedge risk – valuation in 55% chance it will fail at payment.
Francesc Balcells, Managing Director of EM Debt at FIM Partners, estimates that about half of the $100 billion that Egypt needs to pay by 2027 is to the IMF or bilaterally, mostly in the Gulf. “Under normal circumstances, Egypt could pay,” Balcells said.
Kenya spends about 30% of its revenue on interest payments. Its bonds have lost nearly half their value and it currently has no access to capital markets – a problem with $2 billion worth of bonds that are due to mature in 2024.
Regarding Kenya, Egypt, Tunisia and Ghana, Moody’s David Rogovic said: “These countries are most vulnerable solely because of the amount of debt coming due relative to reserves, and the fiscal challenges in stabilizing the burden. in debt.”
Addis Ababa plans to be one of the first countries to get debt relief under the G20 Common Framework. Progress has been sustained by the country’s ongoing civil war although in the meantime it continues to offer its only $1 billion international bond offering.
The all but legal bid for bitcoin has closed the door to the IMF’s hopes. Confidence has fallen to the point where $800 million bonds maturing in six months are trading at a 30% discount and longer-term bonds at a 70% discount.
Pakistan reached an important agreement with the IMF this week. The breakthrough could not have been more timely, with rising energy prices pushing the country to the brink of a balance of payments crisis.
Foreign currency reserves fell to the lowest level of 9.8 billion USD, barely enough for 5 weeks of imports. The Pakistani rupee has weakened to a record low. The new government needs to cut spending quickly now as it spends 40% of its revenue on interest payments.
Western sanctions sent Russia into default last month, and Belarus now faces similarly tough treatment for standing with Moscow in the Ukraine campaign.
The Latin American nation only defaulted on its debt two years ago but has been returned to crisis by violent protests and an attempt to topple President Guillermo Lasso.
It has a lot of debt, and with the government subsidizing fuel and food, JPMorgan has raised its forecast for the public sector fiscal deficit to 2.4% of GDP this year and 2.1% next year. Bond spreads have reached 1,500 bps.
Bond spreads are just over 1,000 bps but Nigeria’s next $500 million bond payment in a year will easily be covered by reserves that have been steadily improving since June. Even so, it spends almost 30% of its government revenue on interest payments on its debt.
“I think the market is overvalued with a lot of this risk,” said Brett Diment, head of investment firm abrdn for emerging market debt.

Source link


Kig News: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button