www.zerohedge.com BY TYLER DURDEN
A combination of shocks is rippling through emerging market economies and has sparked soaring food and energy inflation, power blackouts, and social unrest. Countries with the weakest balance sheets and high debt loads appear to be sliding first into turmoil. This could be the beginning innings of an emerging market crisis last seen in the 1990s when socio-economic distress toppled governments, according to Bloomberg.
Already, skyrocketing food and energy prices have caused turmoil in Sri Lanka, Peru, Egypt, and Tunisia. The chaos could broaden as some emerging market countries, heavily saturated with debt, could be shocked by higher debt-servicing costs as the Federal Reserve embarks on an aggressive tightening campaign. This couldn’t have come at the worst time for these developing nations, as many had large capital outflows and borrowed vast amounts of money during COVID. Now they’re being hit by food and energy shock due to the Ukraine conflict.
An example of this toxic cocktail that could easily topple a country is Sri Lanka has already been pushed to the brink of default. The South Asian island nation’s foreign exchange reserves have collapsed, and food and fuel shortages, plus high inflation, have sparked unrest.
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