A majority of developing countries are facing debt distress, and their financing problems are sure to grow worse as global financial conditions continue to tighten. The moment is quickly approaching when the world will have to decide between two futures for development finance.
PARIS – For more than a decade, the US Federal Reserve and the European Central Bank, facing below-target inflation, flooded the world economy with liquidity. But now as they are hiking interest rates to bring inflation back down, the flow of funds to low- and lower-middle-income countries has dipped as more are priced out of the market. For at least 20 LICs and LMICs, the yield spread on foreign-currency bonds, relative to US Treasuries, has crossed the 10% threshold.
PARIS – For more than a decade, the US Federal Reserve and the European Central Bank, facing below-target inflation, flooded the world economy with liquidity. But now as they are hiking interest rates to bring inflation back down, the flow of funds to low- and lower-middle-income countries has dipped as more are priced out of the market. For at least 20 LICs and LMICs, the yield spread on foreign-currency bonds, relative to US Treasuries, has crossed the 10% threshold.