Emerging-market debt issues will be felt across international financial system

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The threat of more Covid-19 outbreaks will strengthen the hand of debtor countries when negotiating repayment terms

New York/Oslo — The Maldives’ coral-encrusted islands have long been irresistible to tourists. But today its secluded luxury resorts are deserted, except those converted into makeshift quarantine facilities for stranded coronavirus patients.

The virus has shattered global tourism and devastated the Maldivian economy. The International Monetary Fund has gone from projecting a 6% expansion in GDP this year to an 8% contraction. The risk is that this brutal, abrupt recession could translate into the Maldives becoming the latest country to sink into sovereign bankruptcy.

 

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