LONDON (Reuters) – Central banks, finance ministers and political leaders will meet next week on behalf of the World Bank Group and the International Monetary Fund (IMF). spring meeting.
Rising inflation, rising borrowing costs and a strong dollar have made it significantly more costly to repay loans and raise funds in many developing countries, and several defaulted last year.
Below are countries that are facing a debt crisis or have already defaulted on their international loans.
Egypt
Egypt’s tourism-dependent economy has been hit by the one-two punch of COVID-19 and soaring food and energy prices, leaving it short on dollars and struggling to pay its mounting debt.
Cairo secured a new $3 billion IMF package in December by committing to a flexible currency, a greater role for the private sector, and various monetary and fiscal reforms.
Import and currency restrictions are weighing on economic activity, and foreign exchange shortages persist despite three major devaluations since March 2022, which halved the pound. Inflation is now at its five-year high of over 30%.
El Salvador
El Salvador cleared the $600 million bond payment hurdle in January. The Central American country has approximately $6.4 billion of outstanding Eurobonds. The next payment won’t be made until 2025, but El Salvador’s high debt service costs and concerns about its funding plans and fiscal policy have put its debt in a serious pinch.
The country’s move to make Bitcoin legal tender in September 2021 has effectively closed the door to IMF funding. However, the IMF acknowledged that the risks to El Salvador accepting bitcoin “have not yet materialized”.
Ghana
Ghana is in the worst economic crisis of a generation, spending more than 40% of government revenue on debt service last year. In January, it became her fourth country to seek rework under the Common Framework.
The West African country secured a $3 billion deal with the IMF in December, but needs to secure loan guarantees from bilateral lenders before it gets final approval. The cocoa, gold and oil producer has already reached a deal to write off its domestic debt and last week began formal debt negotiations with international bondholders.
Lebanon
After decades of mismanagement and corruption, Lebanon’s financial system began to collapse in 2019 and defaulted in early 2020. Lebanon has had no head of state or a fully empowered cabinet since October 31st.
A tentative $3 billion IMF deal was reached in April 2022, but the IMF recently said Lebanon was in a “very dangerous situation” due to a series of slow reforms, including overhauls of banks and exchange rates. WARNED Beirut devalued its official exchange rate in February for the first time in 25 years. Last month, the central bank announced that it would begin selling the US dollar indefinitely to stop its sharp devaluation.
Malawi
Malawi is grappling with a foreign exchange shortage and a budget deficit of about K1.32 trillion ($1.3 billion), or 8.7% of GDP.
The donor-dependent Southern African country is trying to restructure its debt to secure more money from the IMF, which approved an emergency fund in November.
Pakistan
Months of political and economic turmoil, exacerbated by last year’s devastating floods and record inflation, have pushed Pakistan into a danger zone.
China agreed last month to refinance $1.8 billion already in Pakistan’s central bank, rolling over a $2 billion loan that matured in early March, plunging Pakistan into a deep balance of payments crisis. provided relief.
But negotiations with the IMF on the delay of a $1.1 billion loan tranche, part of the $6.5 billion bailout agreed in 2019, have dragged on, and reserves have plunged to less than four weeks of imports. increase.
Tunisia
Tourism-dependent North African economies are in severe crisis leading to shortages of basic food items.
The IMF’s $1.9 billion loan has stalled for months as the Tunisian president shows little sign of action on major reforms. Most of the debt is domestic, but foreign loan repayments are expected later this year. Credit rating agencies say Tunisia could default.
Sri Lanka
Sri Lanka defaulted on its international debt last year after mismanagement of its economy, exacerbated by the COVID-19 pandemic, sparked a political crisis that left even essential imports without dollars. .
The IMF’s signing of a $3 billion relief package last month could help the South Asian island nation secure an additional $4 billion in aid from the World Bank, Asian Development Bank and other lenders.
Government officials are aiming to complete the debt restructuring talks by September. Sri Lanka is also refinancing some of its domestic debt and aims to complete it by May.
Ukraine
Ukraine has just received the first $2.7 billion tranche under a four-year $15.6 billion IMF loan program. It’s part of a larger $115 billion global support package.
The country stopped making all debt payments last year following Russian aggression and will have to restructure its debt if the situation stabilizes.
The IMF estimates that Ukraine needs between $3 billion and $4 billion a month to keep the country running. Rebuilding the Ukraine economy is now expected to cost $411 billion, according to a recent report by the World Bank and others.
Zambia
Zambia, the first African country to default in the COVID-19 era in 2020, is seen as a litmus test for the G20 common framework initiative set out during the pandemic to streamline debt restructuring. But negotiations were very slow, and the external debt ballooned to $18.6 billion.
Western officials have blamed China, the largest bilateral lender, for the holdup it disputes. There was widespread disagreement over how much debt the country could bear in the future.
Zambia’s currency, the kwacha, has fallen more than 10% against the US dollar this year, which the central bank says is fueling inflation. Delays in debt restructuring are said to be part of the reason.
Reporting by Mark Jones, Rachel Savage, Karin Strohecker, Libby George, Editing by Mark Heinrich
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