Recently, a professor from India published an article in The Guardian entitled “The global debt crisis is coming – and it won’t just hit Sri Lanka hard”.
Which countries around the world are at risk of default?
Previously, the foreign data website visual capitalist quoted data from Bloomberg to rank the countries with the highest risk of default, as shown in the figure:
In this alternative list, the top 10 countries with the highest default risk are El Salvador, Ghana, Tunisia, Pakistan, Egypt, Kenya, Argentina, Ukraine, Bahrain, and Namibia.
Many developing countries are on the verge of debt default
The International Monetary Fund (IMF) warns that rising prices and economic slowdown will particularly hit the most vulnerable people and developing countries hard, with more than 30% of emerging and developing countries in or on the verge of debt distress.
Debt default risks threaten about 19 developing countries, with arrears totaling $237 billion.
Today, some developing countries are plagued by the “four highs and one low” (high debt, high deficit, high inflation, high interest rates, and low growth).
In the future, if global inflation continues to be high, rising costs and inflation risk premiums will be transmitted cross-border to developing countries, pushing up the financing costs of developing countries.
The tightening of U.S. dollar liquidity will continue to affect companies’ financing availability in overseas markets, and the scope of the debt crisis will expand.
Pakistan: Credit rating “negative”
Following Sri Lanka, Pakistan, with a population of 220 million in Asia, has also reached the brink of economic collapse. Its currency has plummeted and the situation is critical.
Since the end of 2017, the exchange rate against the Pakistani rupee has entered a state of “free fall”.
Previously, the Pakistani rupee once fell to a record low of 224 rupees per US dollar.
Pakistan’s move to oust former Prime Minister Imran Khan through a no-confidence motion this year has also led to the country facing severe political instability. Since this political earthquake, the Pakistani rupee has fallen by more than 15%.
Along with the depreciation of the exchange rate, crazy inflation occurred in Pakistan.
A senior minister in the Pakistani government even asked citizens to drink less tea to reduce the country’s import burden.
International credit rating agency Fitch previously revised Pakistan’s credit rating outlook from stable to negative.
Türkiye: Credit rating downgraded to B from B+
It is reported that the current inflation in Turkey, a large country in the Middle East, is as high as 80%, reaching the highest value since 1998. It is one of the countries with the most serious inflation in the world.
Affected by the U.S. interest rate hike, the Turkish lira has depreciated sharply since last year, with the depreciation exceeding at least 40%. The shrinkage of the lira has seriously affected the daily lives of local people, reducing their purchasing power. Many people cannot afford daily necessities, and even eat meat. A luxurious thing.
In the first five months of this year, more than 7,500 companies closed down in Türkiye. Among them, as many as 2,000 companies closed down in May alone, an increase of 259.7% compared with the same period last year.
As a typical net oil importer and consumer, Turkey has long maintained dual deficits in its current account and financial account.
After the Federal Reserve raised interest rates, the slowdown in global demand led to a contraction in trade. The combination of high oil prices will increase the trade deficit of net importing countries. Capital outflow pressure under their financial items will be great, making external debt financing more difficult.
Affected by inflation, the international credit rating agency Fitch lowered Turkey’s credit rating to B from B+ and confirmed its economic outlook as “negative.”
El Salvador: Credit rating downgraded to “junk” (CCC)
Compared with other countries that also face the risk of default, the market is more pessimistic about the prospects of El Salvador, a small country in China and the United States. This is obviously inseparable from El Salvador’s President Booker.
In September last year, after announcing the legalization of Bitcoin, Bukele began to openly use government funds to purchase Bitcoin.
However, the price of Bitcoin peaked in November last year. Since the beginning of the year, as Bitcoin has been falling, El Salvador’s national debt has become one of the worst-performing sovereign bonds in the world.
El Salvador’s 2027 government bonds have fallen sharply so far, trading down 32 cents to 28 cents.
Up to now, Bukele’s “official currency speculation” account has also lost about 48%. Although Bukele himself downplayed this floating loss, the failure of his “currency speculation” operation has exacerbated the country’s debt crisis and made the market more worried about the country’s policy stability.
The World Bank and the International Monetary Fund have issued warnings expressing concern about this, and the international credit rating agency Fitch downgraded El Salvador’s credit rating to “junk level” (CCC).
We would like to remind you that we have had recent relations with these countries.For those who do business, do a good job in risk control and be careful about money and goods being lost.
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