A combination of high-interest rates and weak global growth might push a number of emerging economies with large refinancing needs into financial trouble next year.
Many poorer economies were able to weather the aftermath of the COVID-19 pandemic and the Ukraine war thanks to global and bilateral lending.
However, repayments on emerging markets’ high-yield international bonds will exceed $30 billion in 2024, a significant rise from the $8.4 billion left for the rest of the year. This complicates matters for more vulnerable countries if some issuers are unable to refinance their debts shortly.
Meanwhile, nations such as Pakistan, Tunisia, and Kenya “would need to find alternative sources of financing if the market does not reopen for them,” according to Thys Louw, portfolio manager for Ninety One’s emerging markets hard currency debt strategy in London.
According to Merveille Paja, EEMEA sovereign credit strategist at BofA, investors are concerned about refinancing risks for Kenya’s $2 billion bond expiring in June 2024.
“The market expects additional solutions, such as the IMF’s resilience and sustainability trust or a $1 billion external issuance or syndication loan,” Paja told Reuters.
The resilience and sustainability trust, established a year ago, is a lending mechanism for low-income and certain middle-income countries to prepare for climate and pandemics.
“In Pakistan and Tunisia, the completion of the IMF programme will be a critical step towards avoiding a default because it will unlock bilateral and multilateral financing,” Louw noted.
Pakistan’s refinancing requirements for 2024 are equal to 12% of its overseas reserves.
