More sovereign debt defaults are “likely” next year among small emerging countries, ratings agency Fitch said in its 2023 outlook on Monday, citing the likelihood of sudden jumps in borrowing costs, market access and urgent financing needs.
Meanwhile, the Group of 20 (G20) Common Framework debt restructuring process, which is underway in Zambia and Ethiopia and has been completed in Chad, has proven ineffective in facilitating restructurings and is unlikely to improve in the near future. year, the agency added.
Dozens of emerging countries, especially smaller and riskier ones called frontier markets, saw their borrowing costs rise to unsustainable levels in 2022 after the Federal Reserve entered a monetary tightening cycle in an effort to contain rising inflation. after the Russian invasion of Ukraine and continued Covid-19 lockdowns in China.
“International bond market access will remain a challenge for small and frontier emerging markets, and more defaults are likely,” Fitch’s report said.
“As in 2022, there will be instances of more pressing funding challenges in smaller and frontier emerging markets.”
A larger share of emerging markets had a positive credit rating outlook compared to developed markets for the first time since 2018, Fitch said.
However, 2022 was the second worst year for emerging market downgrades, the ratings agency said in a statement accompanying the report.
Source: CNN Brasil
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