Emerging Economies Struggle Amid Liquidity Crunch

Post-COVID sovereign defaults have peaked, with countries like Ghana resolving debt issues. However, a liquidity crisis looms in many emerging economies, threatening development and trust. The IMF World Bank meetings address this, with calls for new liquidity support methods. Current solutions lack speed and scale, say experts.

The recent wave of sovereign defaults in countries such as Ghana, Sri Lanka, and Zambia has subsided, but a looming liquidity crisis in emerging economies poses fresh challenges. The International Monetary Fund warns this could impede development and foster distrust, with the issue taking center stage at the IMF World Bank meetings in Washington this week.

Experts highlight that debt servicing costs have risen, borrowing is more expensive, and external funding sources are becoming scarcer. Initiatives like the Global Sovereign Debt Roundtable are seeking ways to provide immediate liquidity support, yet solutions appear insufficient in scope.

Development banks are urging countries to donate IMF reserve assets to enhance lending capacities. However, with western nations hesitant to increase financial aid, tensions rise as emerging economies face significant financial stress. Analysts warn that this situation endangers global economic stability, with protests erupting from Kenya to Nigeria.

(With inputs from agencies.)