Turmoil in US banks and European banking systems has put more pressure on emerging countries, which are struggling to borrow and repay debts, as five of Africa’s largest economies prepare to raise interest rates.
Bloomberg agency said that Egypt, Morocco and Tunisia are among the emerging countries that are considered the most affected by the international banking crisis, and it is expected that these countries will default on paying their debts, and they will also be forced to raise interest rates to control inflation, during the next two weeks of March, according to the agency. .
The agency stated, in a report, that the bond markets warn of the default of these countries on the payment of their debts, as they are among the most vulnerable economies in the world, after the selling operations that occurred in emerging markets, in March, which led to a rise in yields to unprecedented levels.
She explained that the repercussions of the banking crisis in the United States and Switzerland in Europe prompted investors to flee more risky assets around the world, such as Tunisia, Egypt and Morocco.
According to Bloomberg, investors are now expressing growing doubts about the ability of these troubled economies to repay their debts in foreign currencies. Adding to the uncertainty is the Federal Reserve’s meeting on Wednesday, where US officials will decide whether to continue raising interest rates to control inflation, or pause to reassess the pressures spreading across global markets.
As for Tunisia, the agency indicated that the Tunisian bond market is showing increasing concern about defaults, and has slipped deeper into the distressed region, especially after the statements of the Tunisian President, Kais Saied, about his plans to deport “black immigrants”, which led to the postponement of an urgent rescue plan from the IMF. International criticism.
According to the agency, the risk premium on Tunisian debt, which was trading at about 1,690 basis points, since the end of last February, rose to a record high of 3,930 basis points, on Monday. The cost of insuring Tunisia’s debt against default also rose, in March, to an all-time high of 2,436 basis points, according to the agency.
In Egypt, the spread on dollar bonds jumped above 1,000 basis points, in March, after it had fallen below the main stage of debt that would be considered “performing” in October.. Credit default swaps will approach an all-time high in July as bond investors lose confidence in the Egyptian Stock Exchange.
In another report, “Bloomberg” stated that the central banks in Egypt and Morocco are currently preparing to raise interest rates, and therefore borrowing costs, during the next two weeks in March, to contain constant inflation and deter sales of their assets, which were exacerbated by the global banking crisis.
She explained that the inflation rate in Egypt reached 31.9% last February, and therefore the Central Bank of Egypt is preparing to raise interest rates significantly after inflation accelerated faster than expected and food prices rose at a record pace, driven by a series of currency devaluations.
Economists expect the central bank to increase interest rates by between 200 and 300 basis points.
In Morocco, where the inflation rate reached 8.9% last January, Bloomberg reported that the Bank of Morocco raised interest rates, on Tuesday, for the third time in a row to rein in inflation, which reached its highest level in 30 years and more than doubled its target of 3.9% for the year. 2023 due to severe drought and high input costs.
Three of Morocco’s major financial institutions expect the central bank to raise the benchmark interest rate by 25 to 50 basis points at its next quarterly meeting.
