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Fitch says sovereign defaults jumped to record high rate hike, Russia’s war on Ukraine and Covid

  • Fitch said sovereign defaults are at a record high since 2020 with 14 default events.
  • According to the rating agency, 19 such incidents are compared between 2000 and 2019.
  • Fitch said default events are taking an average of 107 days to resolve, up from 35 days in 2000.

According to a Fitch Ratings report published on Wednesday, sovereign defaults have risen sharply over the past three years.

Since 2020, there have been 14 such incidents in nine countries, compared to the two-decade-ago period between 2000 and 2019, which saw 19 defaults in 13 different countries.

The surge in defaults has come as sovereign borrowing, with the average general government debt-to-GDP ratio climbing from 31% pre-Covid in 2008, was helped by easier access to the Eurobond market and financing from China.

“Against this backdrop, marginal markets with limited buffers are ill-positioned to deal with severe shocks from the pandemic and the impact of Russia’s invasion of Ukraine on food and energy prices, global inflation and the subsequent sudden tightening of monetary policy,” Fitch said. was placed in position.” ,

Currently, Belarus, Lebanon, Ghana, Sri Lanka and Zambia are in default. Other countries that have undergone such events since 2020 include Argentina, Ecuador and Suriname, as well as Ukraine.

Meanwhile, Russia faced its own defaults last year after Western sanctions limited its ability to pay back investors.

Default events are also taking longer to resolve, particularly due to a lack of coordination among Chinese stakeholders, in addition to China’s demand for multilateral debt within restructuring efforts.

While in 2000 it took around 35 days to resolve an abuse incident, the average duration now takes around 107 days as of 2020. Slower restructuring leads to higher financing costs, Fitch said.


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