Although they have managed to avoid a “fiscal catastrophe”, emerging economies may be heading towards an unsustainable debt trajectory, amid efforts to mitigate the effects of the coronavirus crisis. This is what the report published on Monday, 28, shows by Financial Times.
The article cites Brazil as an example of a country that faces the risk of depleting its debt capacity.
According to the text, the Brazilian government will have to decide “soon it will control its generous social support programs, risking a social and political reaction, or borrow and spend beyond its restrictions, risking a reaction from international investors who would send its currency. collapse, with rising interest rates ”.
The British newspaper points out that, in March, there was a fear that the pandemic would throw emerging into a major debt crisis.
“Instead of default, however, there were new loans. Since April 1, developing countries have raised more than $ 100 billion in international bond markets, ”he points out.
The problem, points the report, is that the fiscal situation of several nations has already reached its limit. The daily cites a survey by the agency Moody’s, which forecasts an average advance of 10% in the debt / GDP ratio of the 19 largest emerging markets this year alone.
“So far, however, requests for help have been few. Although dozens of countries have received emergency funding from the IMF and the World Bank, most have been in small amounts, ”he points out.