Next week, central bankers, finance ministers and political leaders will meet for the World Bank Group and International Monetary Fund (IMF)'s spring meetings from April 10th to 16th. One of the biggest concerns that is expected to be discussed is the?rising number of developing nations at risk of a debt crisis.
Ballooning inflation rates, rising borrowing costs and a strong dollar have made repaying loans and raising money significantly more expensive for many developing nations, pushing several into default last year and many staring at piling debt.
Here is a list of some countries that are facing a debt crisis and/or have already defaulted on international loans.
Months of political and economic turmoil have put Pakistan in a position where it is under a deep crisis. The turmoil has been worsened by disastrous floods last year and?record inflation.
While?China has given some relief by agreeing to refinance $1.8 billion already credited to Pakistan's central bank, and last month?rolled over a $2 billion loan?that had matured earlier in March,?talks with the IMF for a delayed $1.1 billion loan tranche, part of $6.5 billion bailout agreed in 2019,?have dragged on?and on, as per Reuters report. At the same time, Pakistan's foreign exchange reserves have fallen to less than four weeks of imports.
Also Read:?Pakistan?Imported 2,200 Luxury Cars Amid Economic?Crisis
Egypt's tourism-dependent economy was severely hampered by COVID-19, besides?the soaring food and energy prices. This has left it short of dollars and struggling to pay rising debts. In December last year, the country managed to secure a?new $3 billion IMF package by committing to a flexible currency, a greater role for the private sector and a range of monetary and fiscal reforms.
But despite three sizable devaluations since March 2022 that halved the value of the pound, import and currency restrictions have weighed on Egypt's economic activity, and a foreign currency shortage continues as well. As per the report, inflation stands now at a more than five-year high of above 30%.
Next on the list of nations facing a debt crisis is Lebanon. The country's financial system began unravelling in 2019 after decades of mismanagement and corruption, and in early 2020 it defaulted. Since October 31st, Lebanon neither has had a head of state nor a fully empowered cabinet.
It reportedly reached a provisional $3 billion IMF agreement in April 2022, but the IMF recently warned Lebanon was "in a very dangerous situation" due to delays on a range of reforms, including banking and exchange rate overhauls. As per the report, the country devalued the official exchange rate for the first time in 25 years in February 2023.? And last month its central bank said it would begin selling unlimited amounts of U.S. dollars to halt spiralling devaluation and prevent further deepening of the crisis.
Also Read:?Crisis-hit?Lebanon?Hails Man A 'Hero' For Robbing Bank To Get His?Own Money
One of the most widely discussed crises over the past year or so has been that of India's neighbouring island nation. Sri Lanka defaulted?on its international debt last year after economic mismanagement, deepened by COVID-19,?sparked a political crisis?and left the nation without dollars for even essential imports.
Long hours of power cuts, scarcity of essential medicines and food were among the difficulties faced by the nation. But last month, the IMF signed a?$3 billion bailout package that could help the island nation secure additional support of nearly $4 billion from the World Bank, Asian Development Bank and other lenders, as per the report. SL's?government officials reportedly aim to complete debt restructuring talks by September and are also reworking part of its domestic debt and aim to finalise that by May.
The war-hit nation of Ukraine,?too, is facing a debt crisis.??The country?suspended?all debt payments last year in the wake of Russia's invasion and needs to restructure its borrowings if and when the situation stabilises. However, in what can be called a ray of hope, it?recently received the first $2.7 billion tranche under a four-year, $15.6 billion IMF loan program. This is part of a bigger $115 billion global package of support, as per Reuters.
The IMF estimates Ukraine?needs $3-$4 billion?a month to keep the country running, with the war ongoing as well. Rebuilding Ukraine's economy is now expected to cost $411 billion, a recent report by the World Bank and others found.
World's first country to accept Bitcoin as a legal tender, El Salvador, too, is facing a crisis. Though the country cleared a $600 million bond payment?hurdle in January, it has roughly $6.4 billion in outstanding Eurobonds. While the next payment is not due until 2025, concerns about El Salvador's high debt service costs and its financing plans and fiscal policies have pressed its bonds into a deeply distressed territory, as per the report.
And it's also believed that El Salvador's move to make Bitcoin legal tender in September 2021 closed the doors to IMF financing. Now it remains to be seen how the country manages to pay the upcoming debt.
The West African country of Ghana is said to be in its worst economic crisis in a generation, spending over 40% of government revenues on debt payments last year. As per the report, in January 2023, it became the fourth country to seek a rework?under the Common Framework.
Ghana secured a?$3 billion agreement?with the IMF in December, though it still needs to get financing assurances from bilateral lenders to clinch the final sign-off. The cocoa, gold and oil producer has already reached a deal to reportedly write down domestic debt?and last week?kicked off formal debt talks?with international bondholders.
Zambia was the first African country to default during the COVID-19 pandemic in 2020, Zambia is reportedly seen as a litmus test for the G20's Common Framework initiative set up during the pandemic to streamline debt restructurings. But talks have been remarkably slow, and external debt has crept up to $18.6 billion.
As per the Reuters report, western officials have blamed China, its largest bilateral lender, for the hold-up, something that China disputes. China was also blamed for its debt trap policy during Sri Lanka's crisis last year.?
Meanwhile, Zambia's currency, the kwacha, has reportedly fallen more than 10% against the U.S. dollar this year, which the central bank has said is adding to inflation.?
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