74 countries are at risk of bankruptcy due to the pandemic

74 countries are at risk of bankruptcy due to the pandemic

74 countries are at risk of bankruptcy due to the pandemic
The World Bank warns of the possibility of defaults of the poorest countries of the world due to debts that arose against the background of the pandemic. In 2022, payments on loans and credits taken by a group of 74 states from international financial organizations and individuals will amount to about $35 billion. This is 45% more than they paid last year.

Experts attribute the growth in loan repayments (by more than $10.9 billion) to the refusal of many states from the financial assistance from international structures.  The Debt Service Suspension Initiative (DSSI), launched by the G20 in April 2020, turned out to be ineffective.

Servicing of the total debt of $20 billion that 73 states were due in 2020 has been suspended until the end of 2021.  Despite this, many governments have turned to private capital markets to finance their response measures to the pandemic.  Only 42 countries received $12.7 billion in aid, according to the Paris Club, which helped to coordinate the project along with the IMF and the World Bank.
Sri Lanka is the closest to bankruptcy, according to experts.
S&P Global rating agency has recently warned of the country's risk of default in the very near future, downgrading its sovereign bond rating.  The deepening financial and humanitarian crisis, caused by the loss of tourism and high government spending, the need for huge debt repayments to China, led to unprecedented inflation in the country.

About half a million people have been below the poverty line since the beginning of the pandemic.  This, according to experts from the World Bank, is tantamount to the loss of progress in the fight against poverty over the past five years, which was observed in Sri Lanka.

In November 2021, inflation reached 11.1%.  On January 17, 2022, the government of Sri Lanka transferred $500 million to redeem government bonds, $117 million of which was spent on repaying debts to domestic creditors (primarily credit institutions).

Rising prices have forced previously wealthy sections of the population to think about a need for the survival of their families.  For many others, essential goods were not available.
The Sri Lankan authorities have declared a state of emergency, giving the military the opportunity to control the sale of rice and sugar at special prices.  But this did not solve the problems of poor citizens.
Ghana, Tunisia and El Salvador are also at risk of default.  According to the Banksta telegram channel, the experience of cryptocurrency trading conducted by the President of El Salvador was unsuccessful.  It is assumed that this could have caused $11 million in damage to the budget. Bitcoins purchased for $71 million are currently worth about $60 million.

Experts note that servicing loans is becoming more expensive.  Whereas in the first two years of the pandemic, financial regulators cut interest rates, having made borrowing cheap, as expectations of monetary tightening grew, and so did the rates.
Developing countries, led by Brazil and Russia, have been aggressively raising rates in recent months in an effort to stem inflation.
World Bank experts are calling on the governments of the poorest countries to turn to debt restructuring.  This could be an attempt to conclude agreements with creditor countries or with private investors on the possible easing of payment terms.  However, to date, only three states have begun restructuring: Chad, Zambia and Ethiopia.