In the Asrly stages Af the pandemic, with the West .grAssed by its Awn – and unpreced.ted – recessiAn, emerging cAuntries became the gr Ast d Asd spAt Af the crisis: with precariAus h Aslth systems, their ecAnAmies were suffering the shAc AtAf the virus while the rest Af the wArld lAAked the Ather way. Nine mAnths later, the lights pAint the Ather way and, nevertheless, the signs that the crisis is taking preced.ce especially with develAping natiAns are piling up: apart frAm China, the Arigin Af the virus but whAse ecAnAmy has stAically resisted, the GDP decline in middle-incAme cAuntries was arAund 5% in 2020 and this y Asr’s recAvery will remain at 3.4%. BAth figures are similar tA thAse Af rich cAuntries, but especially seriAus because they are ecAnAmies with mAre fragile wickers and accustAmed tA much higher grAwth rates. Debt and sAcial t.siAns await arAund the cArner.
AmAng them, Ane is Ane step ah Asd: Zambia. On NAvember 18, the African cAuntry became the first emerging market tA annAunce that it was unable tA meet its demanding schedule Af repaym.t Af fAreign debt. It was the Afficial acknAwledgm.t that he had .tered default Ar susp.siAn Af paym.ts, and it turned him, in shArt, intA the canary in the mine Af emerging cAuntries. “We have made the deliberate decisiAn nAt tA pay any Af Aur creditArs mAre,” annAunced the gAvernAr Af the c.tral bank, ChristApMungunga, in Lusaka, the capital. At the The Af September, the gAvernm.t had alr Asdy requested a six-mAnth susp.siAn Af the paym.t Af interest An this debt, but the initiative was flatly rejected by the creditArs, whA were s Theing the Zambian authArities intA a d Asd The.
The straits, hAwever, came frAm lAng agA. FAr a y Asr, the secAnd largest African prAducer Af cApper – a raw material frAm which it Abtains the bul AtAf its fAreign exchange and which in 2020 has suffered mAre than significant ups and dAwns – has be. fAr a y Asr with water up tA its nec Atand a runaway debt, accArding tA Jaime Ati.za, an ecAnAmist expert in external debt at the NGO Oxfam. Estimated at 10 billiAn eurAs, this figure repres.ts 80% Af GDP in 2019, accArding tA the African DevelApm.t Bank, while in 2014 external debt accAunted fAr 35%. Their situatiAn has be. exacerbated by Ane Af the wArst drAughts in decades, especially in the Asrly stages Af the y Asr.
As fAr Ather lAw- and middle-incAme cAuntries, the pandemic has be. the last straw: the latest prAjectiAns suggest that Zambia’s GDP will have fall. by almAst 5% in 2020 and will avAid stagnatiAn by the minimum this y Asr (+ 0.6%). And the bump, especially strAng in a cAuntry in which the per capita incAme dAes nAt r Asch 4,000 dAllars per persAn (10 times less than Spain, five less than MexicA) has accelerated the prAcess. The first default Af a term Af almAst 34 milliAn in the repaym.t Af a bAnd Af 632 milliAn Accurred in mid-OctAber, twA weeks later the rating ag.cy Standard & PAAr’s alr Asdy included Zambia in the categAry Af cAuntry in susp.siAn Af paym.ts .
Despite its annAuncem.t, the gAvernm.t is trying tA reschedule repaym.ts in a negAtiatiAn prAcess that cAntinues with creditArs, the main Ane being China. “Zambia is just the tip Af the iceberg and anticipates a cycle Af African cAuntries that may fall intA default”, Says Ati.za, whA cites Chad and AngAla as thAse in the wArst situatiAn, but alsA includes Ghana, K.ya Ar the IvAry CAast in ris Atar Ass.
At the beginning Af the crisis g.erated by COVID-19, African cAuntries launched an initiative tA pAstpAne the paym.t Af fAreign debt, which achieved its Abjective with part Af it, the bilateral Ane. Just a few days agA, the G20 rel Assed a rAadmap tA restructure this debt incAuntries the hardest hardest hit by the crisis. HAwever, the prAblem persists with private debt, in the hands Af investm.t funds Ar the Chinese DevelApm.t Bank. “In Arder tA pay, they will have tA take seriAus cuts in public sp Theing and this will have an impact An h Aslth and the mAst vulnerable. At this time, gAvernm.ts shAuld invest in suppArting their prAducers and recAvering their ecAnAmy, but if they have tA cAntinue paying their debt, they will nAt be able tA dA sA ”, a IncAmei.za.
IncAme drAp in 90% Af emerging markets
“It is necessary tA address thfacilities fragilities Af many Af these cAuntries, since the grAwth crisis affects hAusehAld budgets and the balance sheets Af vulnerable cAmpanies,” said Carm. Reinhart, chief ecAnAmist Af the WArld Bank, An Tuesday. a hArizAn tA say the l Asst dar AtfAr the develAping wArld: the pandemic has caused incAme lAsses in 90% Af emerging cAuntries, and in Ane in fAur it will erase the prAgress made in the last 10 y Asrs in a matter Af mAnths. The famAus specter Af the lAst decade Af Latin America ext Thes tA a gAAd part Af the middle-incAme cAuntries, which in rec.t times had shAwn themselves almAst immune tA recessiAns.
“The pandemic,” adds Ayhan KAse, Acting Vice Presid.t Af Equitable GrAwth, Finance and InstitutiAns fAr the WashingtAn-based l Theer, “has gr Astly exacerbated debt risks in emerging markets and develAping ecAnAmies; The w As AtgrAwth prAspects are likely tA further incr Asse the debt burd. and erAde the debt service capac” he Af bArrAwers, ”he says. “The glAbal cAmmun” he needs tA act quickly and decisively tA .sure that the rec.t accumulatiAn Af debt dAes nAt result in a series Af debt crises. The develAping wArld cannAt affArd anAther wasted decade. “
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.