A barrage of shocks is building that’s unlike anything emerging markets have had to confront since the 1990s, when a series of rolling crises sank economies and toppled governments.
Turmoil triggered by rising food and energy prices is already gripping countries like Sri Lanka, Egypt, Tunisia and Peru. It risks turning into a broader debt debacle and yet another threat to the world economy’s fragile recovery from the pandemic.
Compounding the danger is the most aggressive monetary tightening campaign the Federal Reserve has embarked on in two decades. Rising U.S. interest rates mean a jump in debt-servicing costs for developing nations — right after they borrowed billions to fight COVID-19 — and tend to spur capital outflows. And on top of it all: the stark reality that war in Europe, which is driving the latest food and energy shock, shows few signs of ending.
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