[vc_row][vc_column][vc_column_text dp_text_size=”size-4″]WASHINGTON: A combination of high interest rates and weak global growth could push a number of emerging economies with large refinancing needs into debt trouble next year.
Many weaker economies were able to weather the aftermath of the COVID-19 pandemic and the Ukraine war thanks to multilateral and bilateral lending.
However, repayments on emerging markets’ high-yield international bonds will total $30 billion in 2024, a significant increase from the $8.4 billion left for the rest of the year. This complicates matters for more vulnerable countries if some issuers are unable to refinance their debts soon.
Meanwhile, countries such as Pakistan, Tunisia, and Kenya “would need to find alternative sources of financing if the market does not reopen for them,” according to Thys Louw, portfolio manager for Ninety One’s emerging markets hard currency debt strategy in London.
According to Merveille Paja, EEMEA sovereign credit strategist at BofA, investors are concerned about refinancing risks for Kenya’s $2 billion bond maturing in June 2024.
“The market anticipates additional solutions, such as the IMF’s resilience and sustainability trust or a $1 billion external issuance or syndication loan,” Paja told Reuters.
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The resilience and sustainability trust, established a year ago, is a lending facility for low-income and some middle-income countries to prepare for climate and pandemics.
“In Pakistan and Tunisia, the completion of the IMF programme will be a critical step towards avoiding a default because it will unlock bilateral and multilateral financing,” Louw added.
Pakistan’s refinancing requirements for 2024 are equal to 12% of its international reserves.[/vc_column_text][/vc_column][/vc_row]
