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Global uncertainties remain at an elevated level, first due to the pandemic and now because of the war in Ukraine.

According to the IMF, in 2020, the global debt rose by 28 percentage points and reached a record of $226 trillion. Supply chain disruptions and high inflation are exerting immense pressure on emerging economies.

Recently, Sri Lanka defaulted on its debt payments; it is amidst political turmoil and is facing an acute shortage of fuel and essential items. Next in line are several emerging economies e.g. El Salvador, Ghana, Egypt, Tunisia and Pakistan.

Most of these economies have high debt, low external reserves and high-interest payments - indicating a real risk of default. According to Bloomberg, the bond yield of these countries has more than doubled in the past six months, and many investors believe that the current yield levels indicate that a default is a possibility.

A wide fiscal deficit and an upcoming $800 million bond payment place El-Salvador at the top of the risk list. The country's ratings were also slashed by major credit assessors owing to the unpredictable policies of President Nayib Bukele. El-Salvador made Bitcoin legal tender last year - since then the asset has lost more than 50% of its value.
 

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