Source https://www.premiumtimesng.com/business/business-news/265439-rising-debts-pose-risk-to-nigeria-other-emerging-economies-imf.html


The International Monetary Fund (IMF) on Wednesday
warned that rising public debts in emerging economies
may constitute direct risk to financial stability.
The IMF Financial Counselor and Director of the
Monetary and Capital Markets Department, Tobias
Adrian, disclosed this during the Global Financial
Stability report presentation at the ongoing IMF/World
Bank Spring meetings in Washington.
According to him, short-term risks to financial stability
had increased, and medium term risks remained high,
while vulnerabilities in global markets might make the
road ahead bumpy and put growth at risk.
“Rising foreign debts remain a big risk to financial
stability. The debts that are accumulated quickly are
deteriorating and could pose financial stability crisis in
the future in emerging markets,” he said.
Mr Adrian said also that the Fund had continued to track
debt issuance programmes in emerging markets which
Nigeria belonged to, and that bank-dollar liquidity
mismatches also remained a concern.
He explained that the international US-dollar balance
sheets of non-US banks rely on short-term or wholesale
sources for about 70 per cent of their funding.
He explained that the practice could leave banks
exposed to dollar funding problems in the event of
strains in markets.
“Our growth risk analysis which links financial
conditions to the distribution of future global growth
indicates that, under a severely adverse scenario, growth
could be negative three years from now.
“Stretched valuations across many asset classes,
borrowing by emerging markets and low income
countries and bank-dollar liquidity mismatches remain
vulnerabilities,” he said.
Mr Adrian also said issuance of riskier bonds had
surged, while debt sustainability in emerging markets
and low income countries deteriorated.