Sri Lanka will not be the last country to plunge into a debt crisis. The island nation defaulted in May this year as soaring global food prices and a tourism slowdown caused by Covid-19 collided with years of profligate state spending. Inflation is running at 54.6% and essentials such as food and medicine have run short.
“The amount of bonds issued by African states on international markets has tripled in the last ten years.” These instruments have been bought by “insurance companies, pension funds, hedge funds” and investment banks. The countries with the shakiest debt positions include Mozambique, Zimbabwe, Malawi and Zambia. Governments borrowed freely after the financial crisis, says The Economist. “In 2019 public debt stood at 54% of GDP across the emerging world.” Budget deficits then soared amid the pandemic, but now the bill is coming due. A global slowdown and tighter “financial conditions will be more than some governments can bear”.
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