After Sri Lanka, another 12 countries face bankruptcy – Startitup

The future of many countries does not look very rosy. Traditional signs of a debt crisis point to a record number of developing countries that have found themselves in trouble. According to Reuters, Sri Lanka, Lebanon, Russia, Zambia and Suriname are already insolvent, and Belarus is on the brink of it. At least another twelve countries are in the danger zone as rising borrowing costs, inflation and debt raise fears of economic collapse. The total sum of individual costs is formidable. As Reuters writes, analysts have calculated that, based on a spread of 1,000 basis points for bonds, there is a debt of $400 billion in play. Argentina is among the countries with the largest debt of up to $150 billion. Other countries that are moving in the same risky direction are Ecuador and Egypt. We can only hope that they will manage to avoid insolvency. If the world markets calmed down and the IMF gave them support, it would be realistic. However, everything must be taken into account, and it is precisely these countries that should be on the lookout. As The Global Frontier writes, according to analysts, these countries have a debt of more than 400 billion dollars. Argentina as number one contender The peso is trading 50% cheaper on the black market, reserves are dangerously low and bonds are trading at just 20 cents on the dollar. That is less than half of their real value after the country’s debt was restructured in 2020. source: Wikimedia/AP Rafael Matsunaga It is clear to everyone that after the invasion of Russia, Ukraine will also have to restructure its debt of more than 20 billion dollars. The crunch is expected to come in September, when $1.2 billion in bonds is expected to come due. It is currently impossible to say when Ukraine will emerge from the war. In such a situation, we are talking about a major crisis, the treatment of which is uncertain. Tunisia belongs to the most threatened countries in Africa, which are preparing for IMF assistance. The budget deficit here exceeded 10%. Due to political instability, it is very difficult for the country to get a loan from the IMF at favorable rates. Morgan Stanley Bank has Tunisia in first place on its list of defaulters. Ghana, Egypt, Kenya, Ethiopia and San Salvador Heavy borrowing has made Ghana’s debt-to-GDP ratio as high as 85%. Their currency has lost almost a quarter of its value this year, and they have already spent more than half of their tax revenue paying interest on their debt. Ghana’s inflation is approaching 30%. Egypt has a debt-to-GDP ratio of up to 95% and is expected to pay off $100 billion in debt over the next five years. Such Kenya spends about 30% of its income on interest payments. The bonds have lost almost half their value and he currently has no access to the capital markets, which is a big problem. source: Wikimedia/AP AntanOP After El Salvador mulls introducing bitcoin as legal tender, it has almost succeeded in shutting the door on IMF hopes. Confidence has sunk so much that $800 million in 6-month bonds are trading at a 30% discount . Longer even with 70%. Pakistan, Belarus, Ecuador and NigeriaPakistan managed to conclude an agreement with the IMF this week. It could not have been better timed, as energy import prices were pushing the country to the brink of a balance of payments crisis. Their foreign exchange reserves have fallen so low that it is barely enough for five weeks of imports. Just as Russia fell into insolvency last month thanks to sanctions, Belarus faces the same fate. This is mainly because it sided with Moscow in the war in Ukraine and has also been hit by international sanctions. Huge protests in Sri Lanka and the departure of the president As we already know, Sri Lanka is in the midst of a deep economic crisis, which sparked protests leading to the departure of the president. Many people say that Sri Lanka is a warning sign for other countries. Sri Lanka has problems paying for important imports, such as food, fuel and medicine. As the BBC writes, inflation here has risen above 50%, while food prices are 80% higher than a year ago. Other Asian countries such as Laos, which has been facing the risk of defaulting on loans for several months, are also at risk. The increase in oil prices has burdened fuel supplies and increased food costs. It is estimated that up to a third of the population here lives in poverty. In recent years, China has loaned Laos huge sums of money to finance projects. According to the World Bank, Laos’ public debt was 88% of GDP last year, with nearly half owed to China. Thanks for reading Startitup. If you have an observation or found an error in the article, write to us at [email protected]. Sources: Reuters, BBC, The Global Frontier