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Since 2020, the impact of the epidemic, the global supply chain tension, the Russian-Ukrainian conflict, the tightening of the Federal Reserve, the soaring food and energy, global inflation and other shocks have followed, and the economic order of some developing countries has begun to fall into chaos, making it more difficult for the governments of many emerging market countries to repay their debts to foreign creditors.

The Ministry of Finance of Sri Lanka issued a statement on June 5438+02:

The statement said that since the independence of 1948, Sri Lanka has maintained a good record of foreign debt repayment, but due to the continuous spread of the epidemic and the Ukrainian crisis, it has been impossible to continue to repay foreign debts normally, and a comprehensive debt restructuring must be implemented.

The Sri Lankan government has requested the International Monetary Fund (IMF) to help formulate an economic recovery plan and provide emergency financial assistance. Sri Lanka is also seeking other multilateral and bilateral financial assistance to cope with the worst domestic economic crisis in more than 70 years.

For more than a month, Sri Lanka's currency, the rupee, has continuously depreciated sharply and the economy has collapsed. The country is facing problems such as lack of foreign exchange, shortage of materials, high prices and tight power supply, which has triggered large-scale protests.

Even because of the lack of paper and printing ink, from March 2 1 day, nearly 3 million of Sri Lanka's 4.5 million students' semester exams were postponed indefinitely.

CEIC data show that the annual inflation rate in Sri Lanka reached 17.5% in February.

In the past 10 years, the public debt related to infrastructure projects has surged, and the total debt due this year is $7 billion, of which 10 billion bonds will expire in July.

However, according to the data of Sri Lanka's central bank, as of March this year, Sri Lanka's foreign exchange reserves have fallen to $6543.8+93 million.

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Sri Lanka's debt default is just the beginning, and the domino effect may begin.

In 2020, among the major emerging market countries, the debt ratio of Argentina, Brazil, South Africa and Malaysia will exceed the internationally recognized warning line of 60%, and the debt ratio of Argentina and Brazil will be around 90%.

According to IMF data, the debt service burden of middle-income developing countries has been at the highest level in 30 years, and the debt crisis of developing countries has become another important risk of the global economy this year.

Among 69 low-income countries, by the end of March 2022, 8 countries were in debt trouble and 30 countries were at high risk, accounting for 55% of all low-income countries.

In March this year, Egypt's central bank devalued its currency by 65,438+04%, paving the way for possible IMF support. The Egyptian government has been strictly controlling its currency exchange rate to increase the attractiveness of its bonds to foreign investors.

In early April, Lebanon declared its national government and central bank bankrupt.

On April 9th, Pakistani Prime Minister imran khan stepped down. According to CEIC data, consumer prices in Pakistan rose by 12.7% year-on-year in March.

Tunisia is also seeking assistance. The supply of important foods such as sugar and flour on the shelves of its grocery store has been sold out recently, and the salary of civil servants has been delayed.

Driven by the depreciation of the exchange rate and the rise in commodity prices, Turkey's inflation rate in March exceeded 60%.

The soaring prices in Peru have also triggered large-scale demonstrations and social unrest.

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The previous article "We are entering a high-cost era" mentioned the global debt problem.

The report "Global Debt Monitoring" released by the International Finance Association (IIF) shows that the total global debt in 20021year exceeded 300 trillion dollars for the first time, reaching 303 trillion dollars, a record high, and the debt accounted for 35 1% of the global GDP.

Take the United States, the world's largest debtor, as an example. The federal government debt of the United States alone has exceeded $30 trillion, which is $7 trillion higher than the gross domestic product (GDP) of the United States last year.

According to a report recently released by the British research institute "Jubilee Debt Campaign", the average proportion of debt service scale in fiscal revenue of emerging markets and developing economies has increased from 6.8% in 20 10 to 14.3% in 202 1 0, highlighting the global debt scale and the seriousness of debt risks.

Countries with a single industrial structure, such as some developing countries that rely on the import of commodities such as food and energy, tourism income and remittances, especially those that are already in a state of persistent current account deficit and heavy debt, have been or are gradually approaching the debt crisis.

Janus Henderson, a global asset management giant: In 2022, global government debt will rise by 9.5%, reaching a record $765,438 +0.6 trillion. The interest rate of national debt will rise by 14.5% this year. Last year, the total yield of global national debt was-1.9%, which was the fourth decline in 35 years.

At the end of March, marcello Esteuf, Global Director of Macroeconomics, Trade and Investment of the World Bank? O believes that more than a dozen developing countries may face debt default in the coming year.

In addition to domestic factors, the debt situation of heavily indebted poor countries is very vulnerable to fluctuations in interest rates and exchange rates. Once the global interest rate center moves up or the local currency depreciates, the debt repayment pressure of these countries will be greatly intensified.

In the current global inflation and the accelerated tightening of the Federal Reserve's monetary policy, this is undoubtedly worse for economies with higher dollar debt, and it also pushes up the global debt default risk.

On this basis, the Russian-Ukrainian conflict has led to an increase in risk aversion in global financial markets, and soaring food and energy prices have added a heavy straw to the camel of developing countries' debts.

Although the US debt ranks first in the world, it should not default before the hegemony of the US dollar falls.

Because as I said before, there are two important ways to solve high debts in human history:

First, the great crisis, through bankruptcy to solve the debt relationship;

Second, there is great inflation. The state solves the government debt by issuing currency on a large scale and collecting inflation tax.

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In the face of the complex situation and global problems of the world economy, no country can be immune to it.

Whether the current situation will spread or trigger global systemic risks is unknown, but it may still become the biggest debt crisis faced by developing countries since the mid-1990s.

Desmond Rahman, a senior researcher at the American Enterprise Institute, told reporters that the debts of emerging markets and developing economies are at an unprecedented high level, and they are extremely vulnerable in the environment of raising interest rates and slowing global recovery. The global economy should be prepared for a possible wave of debt defaults in emerging markets and developing economies.

The debt crisis of developing countries will not only have an important impact on international financial markets and global economic growth, but also pose a threat to China's overseas assets.

As the world's second largest economy and one of the largest creditor countries, China may be affected in trade, investment, finance and other channels.

The "butterfly wings" have been flapped, so we should be prepared for the impact, whether it is a country or an individual!