What the Pandemic Means for Emerging Market Economies and their Debt
The recent rise in emerging market economy sovereign debt may pose substantial problems for several countries, especially Brazil and South Africa. But the decline in global interest rates should ease the burden for many other emerging market governments.
In the wake of the COVID-19 pandemic, governments in emerging market economies (EMEs) ratcheted up their spending and borrowing, leading to the sharp increases in debt shown in Figure 1 below. This rise in debt poses concerns that these economies may be headed for default and crisis. However, the decline in interest rates since the pandemic began should make it easier to service their debt. Therefore, aside from several economies with weak positions especially Brazil and South Africa serious fiscal problems do not appear imminent.