Failures in repayments of increasing loans will add instability in developin

Washington: The Bloomberg website posted an article highlighting the increasing debt burden on the developing countries, causing defaults in repayments. This will push the countries on the defaulter list, which will have political and social consequences. The article cites the situation in Lebanon and Sri Lanka and warns that Pakistan, Tunisia, Egypt, Ghana, and El-Salvador also may face a similar situation.

Sri Lanka has seen public unrest and outbreaks twice in the last six months. Anti-government agitations are being held even in countries like Lebanon and Argentina. Although there has been a transition of a new government in Pakistan, the economic and political instability remains the same. The Bloomberg report claims that the situation is concerning as the 19 developing countries are unstable, and the collective debt burden is nearly USD 237 billion. The debt threat and the resultant crisis have become a reality in lower-income countries. Carmen Reinhart, an economist at the World Bank, has pointed out the looming turmoil experienced by some countries. Rising prices of food grains and shortage of goods can trigger a political flare-up. Christian Keller, an analyst at Barclays, warned that the situation in Sri Lanka could replicate in other countries under stress.

Financial institution Moody’s has warned that African countries like Egypt, Ghana and Tunisia are facing a shortage of foreign currency and are likely to default in repayment of loans leading to overall instability. Argentina has defaulted nine times on refunds, and anti-government agitations are a concern for investors and financial institutions. Data indicates that foreign investors have withdrawn investments of USD 4 billion from these developing countries.