Sri Lanka just suffered its first sovereign default, joining a list that already included Lebanon, Suriname, Venezuela Y Zambia. Russia Y Ukraine they are also reeling and the concern is that the numbers globally will soon skyrocket.
“Nearly half of the sample of (52) countries are classified as high redemption risk in our assessment. Of these, eight are at risk of reserve depletion by the end of 2023, indicating high default risk. These are Sri Lanka, Maldives, Bahamas, Belize, Senegal, Rwanda, Grenada and Ethiopia“, indicated the note written by the strategist Trang Nguyen on Tuesday.
A jump in global interest rates in response to rapidly rising inflation also means that many countries are facing the reality of rising borrowing costs, a more than decade-long departure from so-called “easy money.”
“Taking into account the risks of a possible default in Russia and the restructuring in Ukraine (…) the HY sovereign default rate of emerging markets could reach 10% this year,” adds the JP Morgan note.
The International Monetary Fund has also said that nearly 60% of low-income countries are either over-indebted or at high risk of being over-indebted.
Analysts at investment firm Tellimer highlighted this week how a record 27 emerging market countries now have Eurobond yields above 10%.
Those yields are an indicator of how much more a government has to pay to borrow in international capital markets, and anything above 10% is generally seen as a sign of trouble.
By Marc Jones of Reuters news agency
Source: Ambito
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