Feature


If there is a picture that encapsulates the crisis in emerging markets, it is that of protestors jumping into the swimming pool of deposed Sri Lankan president Gotabaya Rajapaksa. But the joyful scenes mask a grim reality for many Sri Lankans. The government’s mismanagement of the country has acceler- ated the effects of a global debt crisis that have plunged the country into poverty. More than 10% of country’s 22 million people are living below the poverty line. The United Nations estimates that food shortages mean 70% of the population miss at least one meal a day and one in five are hungry. Pushed to the brink, Sri Lanka defaulted on $35bn (£28bn) of its for- eign debt and is holding restructuring talks with China and its other major creditors.


What does all this mean for UK institutional investors who hold emerging market debt? In the first instance, it drives home the human costs of sovereign debt crises. But there is also an argument to be made that Sri Lanka may well be the canary in the coal mine for a gulf of defaults across emerging nations. Rising commodity prices, inflation and rate hikes have created a vicious cocktail that for many countries may well be too hard to stomach. In the first half of this year, emerg- ing markets bond funds faced $50bn (£41bn) in outflows, according to JP Morgan.


September 2022 portfolio institutional roundtable: Emerging market debt 23


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28