The appetite for sovereign debt restructuring has significantly risen, with low-income and developing nations finding it difficult to manage borrowings amid a steep rise in interest rates and inflation hitting double digits in some countries, the global head of Alvarez & Marsal's sovereign advisory says.
The global consultancy, which launched sovereign advisory services this year, is already in talks with governments in the Middle East, Asia and Africa looking for solutions to lighten their debt burden and manage finances of public sector companies that are draining resources, Reza Baqir said.
“We are engaged in several conversations right now with a diversity of status: some more advanced, some less advanced,” Mr Baqir told The National.
“There is an appetite, a growing appetite [for debt restructuring] … not just at a country level but also at a global level.”
Emerging and developing economies are where “you will see a combination of issues related to debt, related to state-owned enterprises as well as creation and growth of sovereign wealth funds”, Mr Baqir said.
He is a former International Monetary Fund executive and was governor of the State Bank of Pakistan.
Lower and middle-income countries, excluding China, have steadily accumulated debt since 2010.
Their debt to gross national income ratio jumped to 36.3 per cent in 2021 from 25.6 per cent in 2010, according to World Bank’s International Debt Report, launched last year.
Total external debt of all developing economies, including low and middle-income countries, surged to $9 trillion at the end of 2021, more than double the amount a decade ago.
Debt of the poorest countries eligible to borrow from the World Bank’s International Development Association nearly tripled to $1 trillion over the same period, according to World Bank data.
These countries now spend more than a tenth of their export revenues to service their long-term public and publicly guaranteed external borrowings — the highest proportion since 2000.
Global economic challenges and rising cost of borrowings are tipping a large number of countries into debt crises.
About 60 per cent of the poorest countries are already at high risk of debt distress or already in distress, the World Bank estimates.
Central banks around the globe are raising their benchmark interest rates to curb a sharp rise in inflation.
In December, the US Federal Reserve increased its the policy rate by 50 basis points, bringing interest rates to a range of 4.25 per cent and 4.50 per cent, the highest in 15 years.
The Fed, along with the Bank of England and the European Central Bank are expected to continue increasing rates to control inflation.
After hitting 8.8 per cent in 2022, global inflation is expected to fall to 6.6 per cent in 2023 and 4.3 per cent in 2024, although it will still be above pre-pandemic levels of about 3.5 per cent, the IMF said in its latest economic outlook.
Developing and emerging economies in the past were able to roll over their debts as interest rates were kept low for a very long time after the global financial crisis, Mr Baqir said.
But this time the global environment is very different, posing growing challenges amid higher interest rates.
The rise in inflation has also brought its own set of domestic economic challenges, he said.
“This, in our view, is intricately related to appetite. Our key goal is to help sovereigns address these problems earlier, rather than later,” he said.
The sooner countries start addressing these issues, the lower the cost of resolving the debt crisis will be, Mr Baqir added.
Globally, the ratio of debt to gross domestic product fell for a sixth consecutive quarter in the July-September period to 343 per cent of GDP, however, emerging markets bucked the trend, the International Institute of Finance said in November.
The world's debt-to-GDP ratio was 20 percentage points lower at the end of the third quarter than its peak in the first quarter of 2021, with global debt declining by $6.4 trillion to $290 trillion, the IIF Global Debt Monitor report showed.
This is more than $15 trillion below its record of $306 trillion in the first quarter of 2022.
But persistently large budget deficits coupled with subdued economic growth have brought the emerging markets' debt-to-GDP ratio back to its record high of 254 per cent, last registered in the first quarter of 2021, the institute said.
Emerging market government debt topped 65 per cent of GDP in the third quarter, while the financial sector’s debt passed 40 per cent of GDP, according to IIF data.
Governments must take prudent measures to manage debt and their fiscal policies amid weaker global economic growth and tighter monetary policy to avoid future pain, the IMF said last month.
Managing current high levels of debt will become increasingly difficult with a rise in borrowing costs and weakening global growth, the Washington-based lender said at the time.
“More importantly, when you look at the projections from the IMF, the average debt-to-GDP for emerging markets is expected to rise from 65 per cent of GDP now, to about 80 per cent of GDP in 2027,” Mr Baqir said.
“There will be many countries that will be considerably above that average number of 80 per cent”, so the outlook for many of these economies is challenging as the level of public debt is expected to grow over the next five years, he said.
Five expert hiking tips
Always check the weather forecast before setting off
Make sure you have plenty of water
Set off early to avoid sudden weather changes in the afternoon
Wear appropriate clothing and footwear
Take your litter home with you
Bob Honey Who Just Do Stuff
By Sean Penn
Simon & Schuster
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
Miss Granny
Director: Joyce Bernal
Starring: Sarah Geronimo, James Reid, Xian Lim, Nova Villa
3/5
(Tagalog with Eng/Ar subtitles)
From Conquest to Deportation
Jeronim Perovic, Hurst
FIXTURES
Saturday, November 3
Japan v New Zealand
Wales v Scotland
England v South Africa
Ireland v Italy
Saturday, November 10
Italy v Georgia
Scotland v Fiji
England v New Zealand
Wales v Australia
Ireland v Argentina
France v South Africa
Saturday, November 17
Italy v Australia
Wales v Tonga
England v Japan
Scotland v South Africa
Ireland v New Zealand
Saturday, November 24
|Italy v New Zealand
Scotland v Argentina
England v Australia
Wales v South Africa
Ireland v United States
France v Fiji
Company%C2%A0profile
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The biog
Name: Marie Byrne
Nationality: Irish
Favourite film: The Shawshank Redemption
Book: Seagull by Jonathan Livingston
Life lesson: A person is not old until regret takes the place of their dreams
Dhadak 2
Director: Shazia Iqbal
Starring: Siddhant Chaturvedi, Triptii Dimri
Rating: 1/5
The stats
Ship name: MSC Bellissima
Ship class: Meraviglia Class
Delivery date: February 27, 2019
Gross tonnage: 171,598 GT
Passenger capacity: 5,686
Crew members: 1,536
Number of cabins: 2,217
Length: 315.3 metres
Maximum speed: 22.7 knots (42kph)
Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
Sweet%20Tooth
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Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
UAE currency: the story behind the money in your pockets
White hydrogen: Naturally occurring hydrogen
Chromite: Hard, metallic mineral containing iron oxide and chromium oxide
Ultramafic rocks: Dark-coloured rocks rich in magnesium or iron with very low silica content
Ophiolite: A section of the earth’s crust, which is oceanic in nature that has since been uplifted and exposed on land
Olivine: A commonly occurring magnesium iron silicate mineral that derives its name for its olive-green yellow-green colour
UAE currency: the story behind the money in your pockets
Company profile
Date started: 2015
Founder: John Tsioris and Ioanna Angelidaki
Based: Dubai
Sector: Online grocery delivery
Staff: 200
Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends
Green ambitions
- Trees: 1,500 to be planted, replacing 300 felled ones, with veteran oaks protected
- Lake: Brown's centrepiece to be cleaned of silt that makes it as shallow as 2.5cm
- Biodiversity: Bat cave to be added and habitats designed for kingfishers and little grebes
- Flood risk: Longer grass, deeper lake, restored ponds and absorbent paths all meant to siphon off water
England squad
Moeen Ali, James Anderson, Jofra Archer, Jonny Bairstow, Dominic Bess, James Bracey, Stuart Broad, Rory Burns, Jos Buttler, Zak Crawley, Sam Curran, Joe Denly, Ben Foakes, Lewis Gregory, Keaton Jennings, Dan Lawrence, Jack Leach, Saqib Mahmood, Craig Overton, Jamie Overton, Matthew Parkinson, Ollie Pope, Ollie Robinson, Joe Root, Dom Sibley, Ben Stokes, Olly Stone, Amar Virdi, Chris Woakes, Mark Wood
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Company%20profile
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