Emerging Market Debt Burdens May Be Sorely Understated

For emerging economies, coronavirus struck first through the financial markets. Long before the numbers of cases and deaths in these countries began to spread alarm, many emerging markets experienced a sudden halt in foreign investment inflows, the Financial Times reported in a commentary. Overseas investors have taken $95bn out of EM stocks and bonds since late January, according to the Institute of International Finance, dwarfing the withdrawals that followed the onset of the global financial crisis in September 2008. As Covid-19 infections rise and fragile health systems struggle to cope, foreign investors may be low on the list of concerns for EM governments. But these outflows will have a big impact on the fiscal measures policymakers can bring to bear on the crisis. Emerging markets’ overseas liabilities, moreover, may be bigger than previously imagined. Read more