Emerging markets need to pay off $ 34 billion in debt amid tightening liquidity deficit

US, WASHINGTON (ORDO NEWS) — Countries with emerging markets will have to pay off debts worth about $ 34 billion in the next 12 months, with Bahrain and Ecuador waiting for the highest payments in terms of their foreign exchange reserves, investment bank Goldman Sachs wrote in an analytical note.

Faced with global asset sales, emerging markets are trying to curb the spread of coronavirus by restricting the movement of people and using monetary and fiscal policies to cushion their economies.

Markets are closed to accommodate new debt, and investors are closely monitoring whether countries have enough reserves to cover international obligations, especially in the face of a shortage of dollar liquidity.

Most countries have enough reserves to pay off international obligations with repayment in the next 12 months if they are not spent on other needs, Goldman Sachs writes.

Oil exporters Bahrain and Ecuador are in the most vulnerable position, according to investment bank data. In the next 12 months, Bahrain will have to pay off $ 2 billion, which is more than 50% of its foreign exchange reserves, while Ecuador – $ 1.5 billion, or slightly less than 50% of its reserves.

Bahrain is in talks with banks on a loan worth about $ 1 billion, Reuters sources said last week. In 2018, this state received financial assistance from its Persian Gulf neighbors in order to prevent a credit crisis caused by a long period of low oil prices.

Meanwhile, Fitch Ratings downgraded Ecuador’s rating to “B-” last week, citing a sharp drop in oil prices, loss of access to capital markets and possible problems with receiving funds from the IMF and other lenders.

Goldman analysts excluded data from Argentina and Lebanon trying to restructure their international obligations from the report.

Kyrgyzstan and Belarus on Monday also announced plans to restructure their external debt.

In 2022, emerging markets will have to pay off $ 60 billion.


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