![]() Credit-default swaps on developing-country debt spiked in the first weeks of the Ukraine war, showing a growing fear of default - and while they've since retreated, they're still some 90 basis points above last year's average.īloomberg Economics, which keeps scorecards of the building risks for Emerging Market countries, puts Turkey and Egypt top of the list of major emerging markets exposed to "economic and financial spillovers" from the Ukraine war. Some 13 emerging countries have bonds trading at least 1,000 basis points above US Treasuries, up from six a year ago. That kind of uncertainty has driven protesters to call for President Gotabaya Rajapaksa to resign even as his government tries to negotiate help with the IMF and Asian powers like China and India. ![]() "I don't know how the others will find ways to cook or get by." "At least we have leftovers from our food stall to eat," Gunasena said. It's meant sending his wife and son to stand for hours to refill the cooking-gas cylinder they need to run their Colombo food stall - only to see them turned away when supplies run out. Last week, it suspended foreign debt payments, deciding to use what's left of its reserves to cover food and energy imports rather than pay investors.įor people like Jagath Gunasena, the crisis has already arrived. The country's currency is down nearly 40 per cent this year. Which means Sri Lanka, for now, is at the vanguard of the potentially broader crisis. Still, Russia's role as the sanctions-hit aggressor make it a unique case. The biggest default looming in emerging economies is in Russia, where Putin's decision to invade Ukraine has brought sanctions, economic isolation, and a pledge to pay debts only in roubles - which would likely be ruled a breach of commitments, triggering losses for investors. The combination of real-economy shocks and financial-market tightening, he said, is "going to push a large number of low-income countries into the need for debt restructuring". "We can see this train wreck coming towards us," said John Lipsky, who spent half a decade as No. The World Bank slashed its global growth forecast and announced the creation of a US$170 billion (S$232 billion) rescue package - bigger than its Covid-19 response - for crisis-hit nations. It also warned of the possible return in emerging markets of the sort of "doom loop" that led Russia to default in 1998, helped bring Vladimir Putin to power and took hedge fund Long Term Capital Management to the verge of collapse. Rising inflation troubled the economy throughout the 1970s and to tackle it, pay caps were imposed on major industries including coal mining.īy the end of 1973, workers' average pay had fallen behind inflation and the National Union of Mineworkers held a national ballot on strikes.The IMF, in its latest World Economic Outlook, likened the war's impact to "seismic waves" rolling over the global economy. Pubs shut and TV curbed in 'three-day week' With commentators now warning the Government faces a similar season of turmoil, here is how Britain was thrust into chaos - and risks being so once more. ![]() It marked the start of a dark decade that culminated in the infamous 'Winter of Discontent', where industrial action left mountains of rubbish piled up in the streets and severe weather cut off access to entire towns. The mass shortages have drawn grim comparisons to the 70s, when Downing Street imposed sweeping restrictions on businesses that slashed the amount of working days in a week to just three. The Prime Minister said the Government was "working flat out" with energy companies to guarantee supply, with wholesale prices for gas surging 250 per cent since January and 70 per cent since August alone. This week, Boris Johnson insisted there would be no return to a 1970s style 'three-day week' amid fears that gas shortages could see the lights go out in thousands of homes. As energy prices soar, supermarket shelves lie bare and inflation goes through the roof, the UK faces a wave of fresh problems going into winter.
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