Debt: which countries have the greatest risk of crisis?

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In a recent report, Evghenia Sleptsova, chief economist at Oxford Economics, concluded that "the sovereign risk indicator suggests that the risk profile of the 17 major frontier markets has continually deteriorated over the past decade. decade". He adds that "much of this deterioration is due to a steady build-up of public debt that is increasingly falling into the hands of private creditors, making these markets more vulnerable to global financial volatility." He also noted China's growing influence, noting that "although public debt has increased significantly, growing concern about China's increased lending to these markets is also of concern" . As a result, he warns that "these two factors will complicate debt restructuring efforts in the future, which investors should pay particular attention to in this renewed context of performance seeking."

Now, what are the riskiest markets?

The sovereign risk scores calculated by Oxford Economics suggest that Pakistan, Ukraine, Lebanon, Argentina and Ecuador top the list of markets most prone to the debt crisis followed by Kenya, Sri Lanka, Bangladesh, Ghana and Oman.

While stressing that some of these countries are already part of IMF programs and adjustment processes, as in the case of Ukraine, Argentina, Egypt and, more recently, Ecuador, the consultant warns that "Ukraine and Argentina are still facing a large double deficit" to which he adds that "the continuity of reforms can not be taken for granted in the next elections". Instead, they recognize that they are "moderately more optimistic about the adjustment process in Egypt, where external imbalances have been sharply corrected, and where the government is making progress in tax reform and tax reform. direct foreign investment is recovering. It is ironic that a failing democracy ensures greater political continuity. While in the case of Ecuador, with a saving in dollars, it is at a standstill in the face of falling oil prices. "It has just reached an agreement with the IMF, and we believe that its bonds are ready for a rebound reflecting the likely impact of the program on macroeconomic stabilization." Regarding Pakistan, he said he "was looking for IMF support, but was struggling to reach an agreement because of his high and opaque debt to China." "We think that finally, an agreement will be obtained with additional support from Saudi Arabia, but we find that Pakistan's EMBI spreads are too low for its fundamentals." Finally, they say they are more concerned about the finances of the country. Oman (from 2021), which is reflected in the level of sovereign risk, due to the poor quality of the data and its relatively good level of political and institutional risk. on the continuity of politics, which may not occur when the risk of succession increases. "