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 particularlyconcerning, as its reserves are currently in the negative.
On the other hand, Pakistan has received a standby agreement from theInternational Monetary Fund (IMF) in the form of a bridge loan, which isexpected to provide temporary relief until the next general election.
Fitch Ratings has noted that Pakistan, along with two other nations, isprojected to allocate 40% or more of its revenues towards debt interestpayments in the coming year.
This situation is exacerbated by higher interest rates, which have made itexceedingly costly for sovereigns with a single-B credit rating to accessinternational bond markets since early 2022. Gregory Smith, a fund managerat London-based M&G Investments, emphasized this financial challenge.
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Interestingly, Egypt stands out as a potential exception, as it isconsidered the country least likely to default according to the JPMorgansurvey. Nonetheless, there is a growing demand for international financialinstitutions and multilateral development banks to increase their lendingto economically disadvantaged countries. This push is driven by the need tosupport development efforts and combat climate change.
One of the most vocal advocates for these reforms is UN Chief AntonioGuterres, who has repeatedly called for sweeping changes to address theinherent biases in global financial systems. These reforms aim to ensurethat low-income countries, especially those vulnerable to climate-relateddisasters, receive the necessary funding and support from wealthier nationsto navigate their economic challenges effectively.