Debt Vulnerable Countries
Pakistan which was recently hit by a devastating flood has an average credit rating of 6 (‘highly speculative’), interest rate spread is higher than 10 pp and gross public debt is 74% of GDP. UNDP
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The debt crisis being faced by developing low and middle-income countries has been discussed by UNDP in its latest paper titled 'Avoiding Too Little Too Late' using data on credit ratings, debt sustainability ratings, and sovereign bond spreads. The paper identifies 54 developing economies (including Pakistan which ranks 51 out of the 54 most debt-vulnerable low and middle-income countries) with severe debt problems.
A third of all the developing economies in the report have seen their debt labeled as being a “substantial risk, extremely speculative or default” and Pakistan is among the countries at the most immediate risk.
Quoting data from the World Bank in the paper, UNDP has mentioned that Pakistan had public and publicly guaranteed external (PPGE) debt worth USD 78.9 billion in 2020 with 86.6% owed to official creditors, 27.3% owed to China, and 14.7% to the Paris Club. While 6% of the population in Pakistan is estimated to live in extreme poverty and the country ranks 147 (out of 182) on climate change vulnerability (table in the graphic of the day - scroll down).
For countries like Pakistan, according to the paper, 'the focus must shift from debt rescheduling to comprehensive restructuring involving write-offs allowing countries a faster return to growth, financial markets, and development progress'.
The international community must urgently step-up debt relief efforts to avert a deepening development crisis as a structurally different future of tighter funding conditions and higher frequency of climate disasters will require a re-think and ramp-up of official sector concessional lending to vulnerable developing economies.
GRAPHIC OF THE DAY
Pakistan is among the bottom 5 countries on the list of 54 most debt-vulnerable economies identified by the UNDP
INSTAGRAM POST
🙏 Weekly Inflation Eased Slightly — www.instagram.com
• The Combined Index was recorded at 204.56 this week compared to 159.26 a year ago increasing by 28.4% on an annual basis
• Annual change in Sensitive Price Index decreased to 28.4% vs. 29.4% last week
• Poorest of the country (Q1) experienced a change of 23.4% vs. 24.52% last week
• On a weekly basis, prices decreased for all quintiles by 0.57%
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What Else We’re Reading
World Bank urges focus on fiscal, energy reforms (Dawn)
Govt getting USD 4 billion as bonds take battering after floods: SBP (Business Recorder)
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