Could Covid-19 drag a major debt crisis in its wake?

According to Larry Elliott* of the Guardian, the answer is “yes-it could”. Stalling economic growth, collapsing exports, and fewer to remittances by migrants to poor countries all suggest and economic time bomb which could blow at any time. According to Elliott, the canary in the mine is Zambia, but there are many other countries who will find it incredibly hard to pay their sovereign debts. Ellliot’s article is well hyperlinked, but if you really want to lift up the hood and look at the engine, the one linking to Kristalina Georgieva, Managing Director of the IMF, is a good place to start.*

Debt crises are always agonising for the countries that live through them. But they are for everyone else too. Bondholders, both private and state, have to take a haircut; a lot of good investment capital is always tied up or lost altogether when these things blow up. Poor people anywhere means less demand for goods and services. Think Greece and Argentina, both well within recent memory. But above all it means political instability, extremism, and migration. To put it brutally, we at LSS always see immigration as an objective economic phenomenon rather than a political or moral one. Migrants behave like ions in an electric field. They move from negative (hunger, political repression) to positive (money). A new wave of migrants crossing the Sahara and Mediterranean could bring problems indeed to the richer countries of the north.

https://www.theguardian.com/business/2020/oct/04/creditors-must-wake-up-fast-to-threat-of-emerging-market-debt-crisis

#debtcrisis #imf #zambia #immigation #migration #restructuring

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