November 30, 2023

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The International Monetary Fund and the World Bank warn of a new debt crisis in 2023 due to the Federal Reserve

The International Monetary Fund and the World Bank warn of a new debt crisis in 2023 due to the Federal Reserve

What is expected to be discussed at the Marrakesh Summit – what is the “hot” agenda?

the International Economy In case vertigoWith a new crisis looming on the horizon, this time with… Domino bankruptcy of developing and poor countries Which triggered it Interest rate hikes by the US Federal Reserve.
the Developing economies face headwinds from all sideswith the last Selling US bonds And Economic slowdown in China to Increased levels of uncertainty for the global economywhile Federal ReserveWe may not have reached the end of the interest rate hike cycle – where pragmatists say inflation appears invincible.
On pRestructuring bankrupt economies is essential To make significant progress before the end of the year as well Conversations continuewhile countries like Pakistan And the Egypt Markets will also be under the microscope when policymakers and asset managers meet at the committee’s annual meetingTo the World Bank and the International Monetary Fund in Marrakesh next week.

Many economies are out of control

“the The international economic landscape is still full of challenges facing emerging markets and poor countries in general And the Their economies are out of control“, He said Joseph CuthbertsonIts chief analyst Pinebridge Investments.
Much depends on the pace and timing of the Federal Reserve’s monetary policy tightening path.
What will the meeting of leading international economic institutions in Marrakesh focus on?

1, the slowdown of the Chinese economy

Investment in debt-financed infrastructure and real estate has reached its limit, and exports have slowed due to the global economy.
How it slows down $13 trillion economy It will affect Other emerging marketsThe question remains unanswered for investors.
“China’s lowest growth in a long time represents a new order in international investment,” Yerlan Syzdikov, head of emerging markets at Amundi, told Reuters.
the Demand for goods The world’s second largest economy X will be hitSpend less on goods and services.
the World Bank lowered its expectations for China’s growth for 2024 to 4.4% from 4.8%
Reuters graphics
2. Financing Ukraine – Fears of Bankruptcy

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Ukraine must decide what It will dispose of its outstanding Eurobonds worth $20 billion when the “freeze” period on international obligations ends in August.
Meanwhile, the size and form of international aid to Ukraine in 2024 remains unclear, and a public spending bill passed by the US Congress that did not include aid for Kiev has added to the uncertainty.
Reuters graphics
3. Refinancing the debts of highly indebted countries

the Debt agreements for distressed countries (A credit event has already occurred.) Work is expected to continue in Marrakesh, where face-to-face meetings between creditors and government officials could yield important results.
the Zambia A formal agreement must be reached with officials Creditors (formal domain)including Paris and China Club.
the Sri Lanka Talks are underway with the International Monetary Fund regarding the first review of a $2.9 billion loan programme.
the Ghana Debt restructuring negotiations are underway with bilateral and private creditors.
the Debt talks have generally frozen, But no Zambia It has been proven to medifficult issue, With the country still to default after becoming the first African country to suspend debt payments during the Covid-19 crisis in 2020.
“It is necessary to set time benchmarks and set realistic expectations (for debt service),” said Anna Gilpern, a law professor at Georgetown University, referring to the G20 debt review process known as the Common Framework, which has been criticized for its long delays.
“We need a road map to know where the next stop will be.”

4. Domino starts going bankrupt…

the Argentinathe Pakistan And the Kenya These countries come at the top of the list of countries most likely to face a sovereign debt default, according to the study he conducted JP Morgan in September.
Its foreign exchange reserves The South American economy is negative and must repay a record $44 billion loan from the International Monetary Fund Which has not been submitted, while the presidential elections are expected to be held on October 22.
The fund was provided to Pakistan A bridge loan that would help the country until cGeneral elections in January.
theHigh-yield debt payments on emerging economies are expected to reach $30 billion in 2024.
Investors are largely focused on Kenya’s $2 billion bond due in June
Meanwhile, higher interest rates mean so It was “too expensive” for countries in this category to tap international bond markets from early 2022.said Gregory Smith, its fund manager M&G Investments Quoted in London.
the Egypt It might be the most likely placeA for bankruptcy transferAccording to JP Morgan research.
Smith said, “Can the IMF program for Egypt be expanded in terms of resources is the big question that will be presented at the meetings,” referring to Cairo’s $3 billion loan.
However, tEgyptian government bonds in dollars fell on Friday 1/60, after Moody’s lowered its credit rating deeper to junk, and International Monetary Fund Director Kristalina Georgieva told Bloomberg that the country will continue to “bleed” its foreign exchange reserves unless it devalues ​​its currency again.
the Egyptthe Pakistan And the Nigeria — whose president is struggling to implement foreign-imposed reforms — will spend40% or more of revenue for debt interest payments next year, according to ratings agency Fitch.
Reuters graphics Reuters graphics
5. The Turkish worker

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Ankara has e$2.5 billion debt payments this yearso you’ll need to take advantage of the markets soon.
the Finance Minister Mehmet Simsek She has met with investors in New York, Washington and London in recent weeks and will make contact with some of the largest asset managers in Marrakesh. Highlighting Ankara’s shift towards traditional handling of monetary issues.
. This includes the African UnionInterest rates have been raised by 2,150 basis points since JuneVirus to fight inflation.. He’s running at a rate of 61.5%.
the Local elections next Marchs the next big political event, since President TaErdogan won another presidential term in May.
Erdogan probably wants nothing better than to consolidate his dominance in the country The internal political scene By crushing it Opposition in local electionsUntil then, said Timothy Ash, chief strategist at BlueBay Asset Management: Repairs from SIMSEC are expected to be limited.

6. Debt market reform

sThe World Bank, the International Monetary Fund, and other multilateral development banks It is under pressure to boost lending to poor countries to finance development and address climate change.
the China Other major emerging economies have long demanded thisTo have a greater role in the global financial structure, Which is still dominated by the parameters defined by pBretton Woods in 1944, when it was established International Monetary Fund And the World Bank.
The BRICS bloc of developing countries added six new members at its annual summit in August, aiming to gain more influence in international finance.

Conclusion: Developing and poor countries suffer from American hegemony over the global economic and financial system.
Excessive indebtedness and underdevelopment lead to huge social and geopolitical crises – if we consider the case of successive military coups in the West African region – but also to huge migration flows that are expected to “choke” the West.
The liberation of the Global South has begun…

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