Not Only Sri Lanka, A Dozen Other Countries In The Danger Zone Of Economic Crisis
New Delhi: Maybe many nations have set their eyes on the current situation of Sri Lanka as financial crises have erupted and political leaders are trying to leave the country, but rich countries like India, China, France, the US, and the UK will have to divert their eyes as many other countries are on the way to become Sri Lanka.
The world has helped the island nation Sri Lanka a lot, but the situation shows that the country may take a long time to stable again. Many nations including India and China have invested a large amount to stable Sri Lanka financially again, but poor management threw the country into more problems.
Egypt
If we talk about the financial situation of Egypt, then the country has a near 95 percent debt-to-GDP ratio and has seen one of the biggest exoduses of international cash this year – some $11 billion.
According to JP Morgan – Egypt has $100 billion of hard currency debt to pay over the next five years, including a meaty $3.3 billion bond in 2024. Cairo devalued the pound 15% and asked the IMF for help in March but bond spreads are now over 1,200 basis points and credit default swaps (CDS) – an investor tool to hedge risk – price in a 55% chance it fails on a payment.
Pakistan
Pakistan struck a crucial IMF deal this week. The breakthrough could not be more timely, with high energy import prices pushing the country to the brink of a balance of payments crisis.
Foreign currency reserves have fallen to as low as $9.8 billion, hardly enough for five weeks of imports. The Pakistani rupee has weakened to record lows. The new government needs to cut spending rapidly now as it spends 40% of its revenues on interest payments.
Belarus
Western sanctions wrestled Russia into default last month and Belarus now facing the same tough treatment having stood with Moscow in the Ukraine campaign.
Nigeria
Investment firm abrdn’s head of emerging market debt, Brett Diment, said “Bond spreads are just over 1,000 bps but Nigeria’s next $500 million bond payment in a year’s time should easily be covered by reserves which have been steadily improving since June. It does though spend almost 30% of government revenues paying interest on its debt. I think the market is overpricing a lot of these risks.”
Kenya
Kenya spends roughly 30 percent of its revenues on interest payments. Its bonds have lost almost half their value and it currently has no access to capital markets – a problem with a $2 billion dollar bond coming due in 2024.
In Kenya, Egypt, Tunisia, and Ghana, Moody’s David Rogovic said: “These countries are the most vulnerable just because of the amount of debt coming due relative to reserves, and the fiscal challenges in terms of stabilizing debt burdens.”
Ukraine
Heavyweight investors such as Morgan Stanley and Amundi warned that Russia’s invasion means Ukraine will almost certainly have to restructure its $20 billion-plus of debt. The crunch comes in September when $1.2 billion of bond payments are due. Aid money and reserves mean Kyiv could potentially pay. But with state-run Naftogaz this week asking for a two-year debt freeze, investors suspect the government will follow suit.
(_Vinayak)
