Fate of These Countries May Face Sri Lanka Like Economic Crisis, Check The List

NEW DELHI: Sri Lanka is experiencing its worst economic crisis in 70 years, with acute shortages of food and fuel, extended blackouts and surging prices.

In the midst of all this, there are other countries too in the line of a possible Sri Lanka-like situation- Notably, Lebanon, Russia, Suriname and Zambia are already in default while Belarus is on the brink along with at least another dozen in the danger zone as rising borrowing costs, inflation and debt all stoke fears of economic collapse.

Argentina

The sovereign default world record holder looks likely to add to its tally. The peso now trades at a near 50% discount in the black market, reserves are critically low and bonds trade at just 20 cents in the dollar - less than half of what they were after the country's 2020 debt restructuring.

The government doesn't have any substantial debt to service until 2024, but it ramps up after that and concerns have crept in that powerful vice president Cristina Fernandez de Kirchner may push to renege on the International Monetary Fund.

Ukraine

Russia's invasion means Ukraine will almost certainly have to restructure its $20 billion-plus of debt, heavyweight investors such as Morgan Stanley and Amundi warn.

The crunch comes in September when $1.2 billion of bond payments are due. Aid money and reserves mean Kyiv could potentially pay. But with state-run Naftogaz this week asking for a two-year debt freeze, investors suspect the government will follow suit.

Tunisia

Africa has a cluster of countries going to the IMF but Tunisia looks like one of the most at risk.

A near 10% budget deficit, one of the highest public sector wage bills in the world and there are concerns that securing, or a least sticking to, an IMF programme may be tough due to President Kais Saied's push to strengthen his grip on power and the country's powerful, incalcitrant labour union.

Tunisian bond spreads - the premium investors demand to buy the debt rather than U.S. bonds - have risen to over 2,800 basis points and along with Ukraine and El Salvador, Tunisia is on Morgan Stanley's top three list of likely defaulters. "A deal with the International Monetary Fund becomes imperative," Tunisia's central bank chief Marouan Abbasi has said.

Ghana

Furious borrowing has seen Ghana's debt-to-GDP ratio soar to almost 85%. Its currency, the cedi, has lost nearly a quarter of its value this year and it was already spending over half of the tax revenues on debt interest payments. Inflation is also getting close to 30 per cent.

Egypt

Egypt has a near 95 per cent debt-to-GDP ratio and has seen one of the biggest exoduses of international cash this year - some $11 billion according to JPMorgan.

Fund firm FIM Partners estimates Egypt has $100 billion of hard currency debt to pay over the next five years, including a meaty $3.3 billion bond in 2024.

Cairo devalued the pound 15% and asked the IMF for help in March but bond spreads are now over 1,200 basis points and credit default swaps (CDS) - an investor tool to hedge risk - price in a 55% chance it fails on a payment.

(Inputs from DT NEXT)

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