JPMorgan's September investor survey has identified Argentina, Pakistan, and Kenya as the nations most at risk of facing a sovereign debt default. Among these countries, Argentina's economic situation is particularly concerning, as its reserves are currently in the negative.
On the other hand, Pakistan has received a standby agreement from the International Monetary Fund (IMF) in the form of a bridge loan, which is expected to provide temporary relief until the next general election.
Fitch Ratings has noted that Pakistan, along with two other nations, is projected to allocate 40% or more of its revenues towards debt interest payments in the coming year.
This situation is exacerbated by higher interest rates, which have made it exceedingly costly for sovereigns with a single-B credit rating to access international bond markets since early 2022. Gregory Smith, a fund manager at London-based M&G Investments, emphasized this financial challenge.
Interestingly, Egypt stands out as a potential exception, as it is considered the country least likely to default according to the JPMorgan survey. Nonetheless, there is a growing demand for international financial institutions and multilateral development banks to increase their lending to economically disadvantaged countries. This push is driven by the need to support development efforts and combat climate change.
One of the most vocal advocates for these reforms is UN Chief Antonio Guterres, who has repeatedly called for sweeping changes to address the inherent biases in global financial systems. These reforms aim to ensure that low-income countries, especially those vulnerable to climate-related disasters, receive the necessary funding and support from wealthier nations to navigate their economic challenges effectively.