The G-20 debt suspension initiative is unlikely to ease credit challenges that the coronavirus pandemic has amplified in some developing countries, according to a report released on Monday by
The global rating agency's research arm said in the sector report titled 'G-20 debt service freeze supports liquidity, high debt level challenges will intensify', that frontier market sovereigns, particularly in
'While debt-service relief will allow some governments to reallocate scarce resources toward health and social spending, it will not have a significant impact on weaker medium-term debt trends,' said
'The coronavirus shock will lead to sharply lower growth this year, wider budget deficits and higher debt burdens for at least the next few years, as well as higher borrowing costs, at least for debt contracted on commercial terms.'
While the report mostly focused on frontier markets in
'We estimate that
Second, the report also said that the coronavirus shock and the authorities' associated policy response have opened large fiscal and external imbalances that will take time to unwind.
'The economic downturn will significantly constrain government tax receipts, while health and social spending pressures will persist, constraining debt-service capacity. We expect that some countries such as the
Moody's estimated that the suspension of debt-service payments could reduce the funding needs of eligible Moody's-rated sovereigns by about
However, this would only cover a fraction of the external gap, leaving an outstanding shortage of around
© Pakistan Press International, source