Dozens of emerging countries, especially the smaller and riskier ones, called frontier markets, saw their borrowing costs soar to unaffordable levels in 2022, as The US Federal Reserve embarked on a cycle of interest rate hikes in an effort to contain rising inflation following Russia’s invasion of Ukraine and China’s COVID-19 lockdowns.
Sri Lanka defaulted on its debt at the beginning of the year, while countries including Egypt, Tunisia and Ghana asked the International Monetary Fund for help.
“International bond market access will continue to be a challenge for small and frontier emerging markets, and further defaults are likely,” the Fitch report said. “As in 2022, there will be cases of more pressing funding challenges in small and frontier emerging markets.”
A higher share of emerging markets had a positive credit rating outlook compared with developed markets for the first time since 2018, Fitch said.
Nevertheless, 2022 was the second worst year for EM downgrades, the agency said in a statement accompanying the report.
“Geopolitical risks remain high. There is still no clear path to reconciliation for Russia and Ukraine, and similarly for US-China relations,” the statement said. “Supply chains of traded goods effectively convey the risks and consequences of these conflicts globally.”
Source: Ambito
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