World Bulletin / News Desk
Argentina defaulted for the second time in 12 years after hopes for a midnight deal with holdout creditors were dashed, setting up stock and bond prices for declines on Thursday and raising chances a recession could worsen this year.
After a long legal battle with hedge funds that rejected Argentina's debt restructuring following its 2002 default, Latin America's third-biggest economy failed to strike a deal in time to meet a midnight deadline for a coupon payment on exchange bonds.
Even a short default will raise companies' borrowing costs, pile more pressure on the peso, drain dwindling foreign reserves and fuel one of the world's highest inflation rates.
However, Argentina is not the only country that has struggled to pay its debt recently. There are 10 other countries currently on Moody's lists with a rating of Caa1 or worse, meaning they are at risk of default.
Ecuador, Egypt, Pakistan, Venezuela, Belize, Cuba, Cyprus, Greece, Jamaica and Ukraine are all on the verge of a default, according to Moody's ratings.
While Ecuador's rating has actually risen to Caa1, up since they defaulted in 2008, Moody's currently rates the country's economy as stable and it is predicted that it will continue its healthy trend set in the past six years.
Egypt, on the other hand, has had its status downgraded to Caa1 in March 2013, and with Egyptians moving their assets into U.S. dollars, the forecast does not look promising for the Egyptian pound. Although the outlook remains negative, Moody's has praised attempts to lower Egypt's government's budget deficit in the fiscal year starting on July 1, 2014.
Pakistan's economy has been dogged with tax return problems and only narrowly avoided default last year. According to The Express Tribune, only roughly one in 200 citizens even files an income tax return.
Venezuela also has a negative outlook, and is in desperate need of short term cash. Therefore, the country plans to issue bonds through the state-owned oil company, Petroleos de Venezuela, to increase the availability of foreign currency in the country, USA Today reported.
The forecast for Belize is stable, and has tried to consolidate all its international debts into a single 'superbond' ever since defaulting almost 10 years ago. However, having missed a payment on this "superbond" in August 2012, it has been paying off its debts in smaller repayments.
Moody's stated that Cuba had "limited access to external financing, high dependence on imported goods, political transition risk, and lack of data transparency," but Russia's recent announced it had written off most of Cuba's debt will ease some of their financial problems.
Despite being rated Caa3, Cyprus has a positive outlook after receiving a 10 billion euro loan from the Troika (IMF, the European Central Bank, and the European Commission) in March in order to avoid bankruptcy. This lifeline, along with its improving economy and low interest rates, is likely to attract more investors in the future.
Likewise Greece, which is also rated Caa3, was saced following tough austerity measures in order to secure a bailout from the Troika, but now the country deals with an unemployment rate remains above 26%.
Meanwhile Jamaica faces slow growth and an unemployment rate that has been consistently above 11% since the global recession, but its trying to balance its budget deficit this year by reducing government spending.
Ukraine, on the other hand, has a negative outlook after a coup ousted President Viktor Yanukovych in February, triggering a civil war in the east of the country between government forces and pro-Russian separatists, leaving Moody's with no choice but to downgrade its credit rating to Caa3.Güncelleme Tarihi: 01 Ağustos 2014, 16:46