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Countries sunk into debt … most recently, Argentina, today, Sunday, May 24, 2020 10:44 pm
The world has had a long history of falling into the trap of being unable to pay foreign liabilities, but in the past few months my case has fallen behind in one go amid expectations of an acceleration of the crisis in the shadow of the Corona pandemic.
Two months after the Lebanese government announced that it had defaulted on $ 1.2 billion in debt, Argentina joined it last Friday in defaulting on a payment of $ 500 million in debts.
Argentina announced that it would not pay any interest, proposing to creditors a restructuring plan that includes much lower interest payments on its debt and deferral of payments until 2024, with the exchange of bonds for new ones with a three-year amnesty period without payments, and a 5.4% reduction in capital And 62% on benefits.
Argentina’s creditors rejected these proposals, prompting Buenos Aires to extend the deadline for negotiations with them until June 2, which means that a technical bankruptcy scenario is likely in this case.
In any case, this will not be the last case of default, according to the expectations of many institutions and specialized agencies, as the Corona pandemic and the accompanying recession and deflation may spark a new wave of defaults, especially in the poorest countries.
As for the most prominent cases of defaults in the last 50 years, they can be monitored as follows:
Hassan Diab, Prime Minister of the Lebanese government, announced in the first week of March 2020 Saturday that Lebanon will not be able to pay the bonds due on March 9, amounting to 1.2 billion countries, in light of the political and economic turmoil in the country.
This was the first time that Lebanon defaulted on its debts, which amounted to more than 170% of GDP, according to Al-Ain News.
To address the crisis, the Lebanese government approved an economic plan that includes requesting an International Monetary Fund assistance program
So that you can get more than 20 billion dollars in financial support from the international community.
Venezuela faced a severe financial crisis in 2017 in light of the collapse in oil prices that led to Fitch Ratings and SB Global Credit Rating announced in mid-November of the same year that the country could not repay part of its external debt totaling $ 150 billion at the time.
On January 2, 2018, Venezuela was declared again as a country defaulting on sovereign debt.
Greece sparked a crisis in the eurozone in mid-2015, when it twice failed to pay the International Monetary Fund debt installments with a total value of two billion dollars, as a step indicating the country’s inability to pay debts of up to 180% of GDP.
But soon European countries stepped in to support and protect Athens from the risk of bankruptcy, and in fact they concluded a European agreement in August 2015 that included a plan to get 86 billion euros over 3 years.
Puerto Rico, located in the Caribbean Sea, which joined a popular referendum in 2017 in the United States of America, stumbled in 2015 on the payment of bonds worth $ 800 million, and applied to creditors to restructure its debt.
According to the British newspaper “The Guardian”, Puerto Rico reached in 2019 an agreement with the bondholders that includes structuring debts estimated at $ 35 billion through obtaining $ 10.7 billion in the form of new debts, and paying $ 3.8 billion in cash.
The crisis erupted in the North Atlantic nation in 2008 during
The global financial crisis when banks were unable to pay their foreign liabilities, in light of the external debt of the three largest banks, which are Kaupthing, Landsbanki and Glitnir, to $ 62 billion.
As a result, the local authorities imposed their control on these banks and stopped the buying and selling of shares, which left the country in conflict with the governments of Britain and the Netherlands after they paid compensation to about 400 thousand citizens in the two countries, worth 4 billion euros, equivalent to 5.8 billion dollars at the time.
During the crisis, the International Monetary Fund approved a $ 2.1 billion program that Iceland directed to rescue local banks, and attempts by Britain and the Netherlands to obtain compensation failed under a decision by the European Court of Justice for Free Trade that Iceland was not obligated to pay deposit guarantees for Dutch and British depositors.
Ecuador suspended payment of about 40% of its foreign debt, totaling approximately $ 9.9 billion, on December 12, 2008.
President Rafael Correa considered that part of this debt is illegal because it was exacerbated by the last negotiations in 2000, marking the third time in 14 years that Ecuador has announced a unilateral moratorium on repayment.
In August 1998, Russia entered the crisis of default of its foreign debts, which amounted to 141 billion dollars.
Moscow took a decision to unilaterally stop the payment of international debt, as well as default on its obligations towards domestic creditors, which amounted to $ 50.6 billion.
Mexico fell into the trap of defaulting on its debts in 1982, when it announced in August of the same year that it was unable to pay its foreign liabilities, which amounted to $ 86 billion without interest amounting to $ 21 billion.
The United States and the International Monetary Fund were quick to provide a package of financial aid to save Mexico in exchange for an economic reform program.
The risks are renewed
Credit rating agency Fitch warned of a new stumbling block due to the Corona virus pandemic, after which 29 countries were downgraded in the first four months of 2020.
According to the agency, the countries of Gabon, Mozambique, the Congo and Suriname are rated at CCC, which indicates a strong possibility of tripping, with Zambia ranking at the CC level, meaning there is a potential failure.
Fitch pointed to the countries of Iraq, El Salvador and Sri Lanka facing the risk of lowering their classification from the level of B- to CCC, which places them in the framework of countries most vulnerable to faltering.