While rich countries can afford to pay more interest on their debts, at least for awhile, it’s the poorer countries that are suffering most.
Developing-world economies that borrowed heavily in dollars when interest rates were low, are now facing a huge surge in refinancing costs. They are not only facing higher interest rates, but have to use more of their own currencies to buy dollars. The buck has been climbing on the back of six consecutive Federal Reserve interest rate increases.
A wave of defaults across developing nations would have major implications for the global economy, just as Asian debt contagion in 1997 spread to Russia and Latin America.
If you think this is theoretical, note that Sri Lanka and Zambia have already defaulted, and Egypt and Pakistan are among a handful of others at risk of following suit. More than half of low-income countries are in debt distress or on the brink of it, Bloomberg said.
Among…
