Home Banking Nascent emerging market debt crisis exposes China’s strict restructuring rules, and more

Nascent emerging market debt crisis exposes China’s strict restructuring rules, and more

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Nascent emerging market debt crisis exposes China’s strict restructuring rules

By Herbert Poensich

Emerging market economies are particularly vulnerable to food, fertiliser and energy supply chain bottlenecks, as well as inflation leading to rising debt servicing costs while demand slows. This puts these exposed countries into acute debt servicing strains. Sri Lanka is the most prominent, but many others will follow. This is not a liquidity crisis but a solvency crisis, which requires an internationally coordinated debt restructuring programme. There are encouraging signs that China might be gradually falling in line with international practices in renegotiating loans to EMs.

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