The International Monetary Fund has expressed concerns about the risk of a global sovereign debt default as many countries across the world are finding it difficult to meet up with their obligations to lenders. According to the IMF, the next few years are likely to bring with them more pressures on countries that are unable to service their debt and will need to expand the current debt vulnerabilities, as conflict and the COVID19 pandemic have exacerbated current risks. With the pandemic now in its third year as well as preexisting issues of insolvency and inflation, the Fund is concerned that the recent Russian war on Ukraine has contributed to record levels of borrowing by countries, and recommends that government embrace economic reforms and engage in debt transparency in order to strengthen rules and procedures. Business Edge takes a look at the warning of a sovereign debt default issued by the IMF. Dr Soji Akinyele, economist and government relations expert joins Lekan Onabanjo.
Africa’s vulnerabilities in regard to the danger of a sovereign debt default are underscored because of the peculiar status of its economies. “A lot of African countries are classified as developing and emerging markets, and to that extent, the vulnerabilities that happened largely from the pandemic and more recently, the Russia Ukraine crisis have put a burden on these countries,” Dr Akinyele says. This last point also is because many of them are commodity-exporting countries and their businesses have been disrupted in the last eight weeks.
However, it is not only African countries that are in danger of defaulting. As a matter of fact, during the pandemic, Argentina did default on its loan commitments. Still, because Africa is mainly an emerging economy, the likelihood is increased- depending on their debt and debt sustainability.
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