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| Poor Countries Face a Debt Crisis ‘Unlike Anything We Have Seen’ | Poor Countries Face a Debt Crisis ‘Unlike Anything We Have Seen’ |
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| From Angola to Jamaica to Ecuador to Zambia, the world’s poor countries have had their finances shredded by the global pandemic. | From Angola to Jamaica to Ecuador to Zambia, the world’s poor countries have had their finances shredded by the global pandemic. |
| The president of Tanzania has called on “our rich brothers” to cancel his country’s debt. Belarus veered toward a default when a promised $600 million loan from Russia fell through. Russia couldn’t spare the money because the ruble had taken a nose-dive, along with oil and gas prices. Lebanon, troubled even before the pandemic, has embarked on its first debt restructuring. And Argentina has defaulted again — for the ninth time in its history. | The president of Tanzania has called on “our rich brothers” to cancel his country’s debt. Belarus veered toward a default when a promised $600 million loan from Russia fell through. Russia couldn’t spare the money because the ruble had taken a nose-dive, along with oil and gas prices. Lebanon, troubled even before the pandemic, has embarked on its first debt restructuring. And Argentina has defaulted again — for the ninth time in its history. |
| The low interest rates of the past decade led to an unlikely alliance between poor countries and international investors. Governments, state-owned companies and other businesses were able to raise money relatively cheaply to finance their growth, while investors searching for better returns than they were getting at home gobbled up that debt. As a result, developing countries owe record amounts of money to investors, governments and others outside their borders: $2.1 trillion for countries ranked as “low income” and “lower-middle income” by the World Bank, including Afghanistan, Chad, Bolivia and Zimbabwe. | The low interest rates of the past decade led to an unlikely alliance between poor countries and international investors. Governments, state-owned companies and other businesses were able to raise money relatively cheaply to finance their growth, while investors searching for better returns than they were getting at home gobbled up that debt. As a result, developing countries owe record amounts of money to investors, governments and others outside their borders: $2.1 trillion for countries ranked as “low income” and “lower-middle income” by the World Bank, including Afghanistan, Chad, Bolivia and Zimbabwe. |
| Now, the pandemic is fraying that alliance. Economic activity has ground to a halt, closing ports, shutting factories, canceling flights and emptying resorts. Governments are on the hook for billions of dollars in interest and principal repayments — payments suddenly made more expensive by volatility in the currency markets at the same time that public health costs are skyrocketing. And their investors are not in a forgiving mood. | Now, the pandemic is fraying that alliance. Economic activity has ground to a halt, closing ports, shutting factories, canceling flights and emptying resorts. Governments are on the hook for billions of dollars in interest and principal repayments — payments suddenly made more expensive by volatility in the currency markets at the same time that public health costs are skyrocketing. And their investors are not in a forgiving mood. |
| “This is really unlike anything we have seen,” said Mitu Gulati, a law professor at Duke University who studies the debts of countries, or sovereign debt. “The last time we had this many countries likely to go under at the same time was in the 1980s.” In Latin America, that period was known as La Década Perdida — The Lost Decade. | “This is really unlike anything we have seen,” said Mitu Gulati, a law professor at Duke University who studies the debts of countries, or sovereign debt. “The last time we had this many countries likely to go under at the same time was in the 1980s.” In Latin America, that period was known as La Década Perdida — The Lost Decade. |
| Resolving those debts took years of negotiations, austerity measures and stalled economic development. But the debt crisis brewing today could be even harder to sort out. | Resolving those debts took years of negotiations, austerity measures and stalled economic development. But the debt crisis brewing today could be even harder to sort out. |
| Poor countries have long been able to borrow from institutions like the World Bank and International Monetary Fund, or from the governments of their trading partners, like China. But in recent years their debt, usually in the form of bonds, became popular with private investment firms. The investment funds in turn placed it with client pension funds, family offices and exchange-traded funds. And those entities have their own interests and their own rules, which will complicate any effort to negotiate easier terms for the borrowers, such as stretched-out payment schedules, lower interest rates or reduced principal. | Poor countries have long been able to borrow from institutions like the World Bank and International Monetary Fund, or from the governments of their trading partners, like China. But in recent years their debt, usually in the form of bonds, became popular with private investment firms. The investment funds in turn placed it with client pension funds, family offices and exchange-traded funds. And those entities have their own interests and their own rules, which will complicate any effort to negotiate easier terms for the borrowers, such as stretched-out payment schedules, lower interest rates or reduced principal. |
| The stakes are high: Argentina’s multiyear dispute with a group of hedge funds including Elliott Management is a reminder of what can happen when a country lapses on its debt payments to investors. Elliott Management, a New York hedge fund run by Paul Singer, and others bought Argentine bonds shortly before the country defaulted in 2001, and held out for full repayment — at one point even seizing an Argentine naval vessel — rather than settle through a debt restructuring. When the sides finally settled in 2016, Elliott received nearly 400 percent of its original investment, according to Argentine officials. | The stakes are high: Argentina’s multiyear dispute with a group of hedge funds including Elliott Management is a reminder of what can happen when a country lapses on its debt payments to investors. Elliott Management, a New York hedge fund run by Paul Singer, and others bought Argentine bonds shortly before the country defaulted in 2001, and held out for full repayment — at one point even seizing an Argentine naval vessel — rather than settle through a debt restructuring. When the sides finally settled in 2016, Elliott received nearly 400 percent of its original investment, according to Argentine officials. |
| A group of 77 poor countries are scheduled to make interest and principal payments of $62 billion on their debts this year, according to calculations by Ugo Panizza, an economics professor at the Graduate Institute of International and Development Studies in Geneva, who published them in a joint research paper with six other economists and bankruptcy lawyers. A portion of that is due in June. | A group of 77 poor countries are scheduled to make interest and principal payments of $62 billion on their debts this year, according to calculations by Ugo Panizza, an economics professor at the Graduate Institute of International and Development Studies in Geneva, who published them in a joint research paper with six other economists and bankruptcy lawyers. A portion of that is due in June. |
| Private investors have bought up more debt than official lenders in Latin American, East Asian and emerging European countries. These countries tend to issue bonds in dollars or other hard currencies. Now, their own currencies have plummeted in value as investors around the world sought refuge in the dollar — Brazil’s is down more than 30 percent against the dollar this year. | Private investors have bought up more debt than official lenders in Latin American, East Asian and emerging European countries. These countries tend to issue bonds in dollars or other hard currencies. Now, their own currencies have plummeted in value as investors around the world sought refuge in the dollar — Brazil’s is down more than 30 percent against the dollar this year. |
| That means it takes more of their own currency to buy every dollar they need to pay their debts. At the same time, they’re spending heavily on everything from hand-washing stations in places without tap water to airlifts of protective equipment for medical workers. | That means it takes more of their own currency to buy every dollar they need to pay their debts. At the same time, they’re spending heavily on everything from hand-washing stations in places without tap water to airlifts of protective equipment for medical workers. |
| “The abruptness of this shock is much larger than the 2008 global financial crisis,” said Ramin Toloui, an assistant Treasury secretary for international finance during the Obama administration. | “The abruptness of this shock is much larger than the 2008 global financial crisis,” said Ramin Toloui, an assistant Treasury secretary for international finance during the Obama administration. |
| The International Monetary Fund has already expanded two emergency loan programs, and more than 100 countries have applied. Some, like Jamaica and Uzbekistan, have begun drawing their loans, while others are still being reviewed. The programs will help in the short term, Mr. Toloui said, but much more financial assistance will be required to keep poor countries solvent during a global shock. The I.M.F. itself has estimated the borrower countries’ total current need, from all sources, at $2.5 trillion. | The International Monetary Fund has already expanded two emergency loan programs, and more than 100 countries have applied. Some, like Jamaica and Uzbekistan, have begun drawing their loans, while others are still being reviewed. The programs will help in the short term, Mr. Toloui said, but much more financial assistance will be required to keep poor countries solvent during a global shock. The I.M.F. itself has estimated the borrower countries’ total current need, from all sources, at $2.5 trillion. |
| During La Década Perdida, the debt that was crushing Latin America mainly involved loans from groups of banks, which spent years restructuring the loans, while the I.M.F. pushed to reduce government waste and inefficiency and make the local economies more productive. The process required cooperation, and if a bank tried to hold out, it might get a stern call from a regulator to bring it back on board. | During La Década Perdida, the debt that was crushing Latin America mainly involved loans from groups of banks, which spent years restructuring the loans, while the I.M.F. pushed to reduce government waste and inefficiency and make the local economies more productive. The process required cooperation, and if a bank tried to hold out, it might get a stern call from a regulator to bring it back on board. |
| The mix of creditors is different today. There are institutions like the World Bank, individual governments that have lent money — often to finance trade — and private-sector investors. So far, the private investors are the only ones that have been reluctant to give the countries a break. | The mix of creditors is different today. There are institutions like the World Bank, individual governments that have lent money — often to finance trade — and private-sector investors. So far, the private investors are the only ones that have been reluctant to give the countries a break. |
| In late March, the leaders of the World Bank and the I.M.F. issued a joint statement calling on international creditors to grant the struggling countries relief. They suspended the payments owed this year from a group of 76 countries known as the International Development Association, plus Angola, which owes large payments to China. A few weeks later, the Group of 20, a forum for large-economy governments and central banks including the United States, Germany and China, issued a communiqué supporting a payment suspension. Thirty-six countries have already applied, G20 officials said Thursday. | In late March, the leaders of the World Bank and the I.M.F. issued a joint statement calling on international creditors to grant the struggling countries relief. They suspended the payments owed this year from a group of 76 countries known as the International Development Association, plus Angola, which owes large payments to China. A few weeks later, the Group of 20, a forum for large-economy governments and central banks including the United States, Germany and China, issued a communiqué supporting a payment suspension. Thirty-six countries have already applied, G20 officials said Thursday. |
| Those organizations have called on bond funds and other private investors to join the suspension on comparable terms. | Those organizations have called on bond funds and other private investors to join the suspension on comparable terms. |
| The response has been slow. | The response has been slow. |
| It took the Institute of International Finance, a trade group from around the globe, nearly four weeks to offer a proposal. The group’s members — banks, insurers, hedge funds and other financial entities — say debt forgiveness is complicated by their fiduciary duties to their clients. | It took the Institute of International Finance, a trade group from around the globe, nearly four weeks to offer a proposal. The group’s members — banks, insurers, hedge funds and other financial entities — say debt forgiveness is complicated by their fiduciary duties to their clients. |
| On Thursday, the group said that it would be up to each investor to decide whether to go along with a moratorium, and that any skipped interest payments would be tacked on to the borrowers’ principal. In other words, the countries would come out of the moratorium with more debt than they went in with. | On Thursday, the group said that it would be up to each investor to decide whether to go along with a moratorium, and that any skipped interest payments would be tacked on to the borrowers’ principal. In other words, the countries would come out of the moratorium with more debt than they went in with. |
| Christian Kopf, head of fixed income at Union Investment Group, a large German asset manager with funds that own emerging market debt, said the approach that official institutions like the World Bank and International Monetary Fund were taking wouldn’t work for many investors. That’s because suspending payments on bonds results in a default. | Christian Kopf, head of fixed income at Union Investment Group, a large German asset manager with funds that own emerging market debt, said the approach that official institutions like the World Bank and International Monetary Fund were taking wouldn’t work for many investors. That’s because suspending payments on bonds results in a default. |
| Updated June 30, 2020 | |
| Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. | |
| Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles. | Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles. |
| A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. | A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. |
| The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. | The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. |
| The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. | The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. |
| So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. | So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. |
| Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. | Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. |
| A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. | A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. |
| The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. | The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. |
| If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) | If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) |
| If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. | If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. |
| “Contractually, under the prospectuses and circulars of the bonds fund that we offer, we are not allowed to own defaulted bonds,” he said. | “Contractually, under the prospectuses and circulars of the bonds fund that we offer, we are not allowed to own defaulted bonds,” he said. |
| Investors would be forced to sell their bonds, and credit rating firms would be required to downgrade the countries. “It would destroy for years to come the market access of those countries,” Mr. Kopf said. | Investors would be forced to sell their bonds, and credit rating firms would be required to downgrade the countries. “It would destroy for years to come the market access of those countries,” Mr. Kopf said. |
| In remarks to a United Nations group on Thursday, the president of the World Bank, David Malpass, did not directly address the predictions that a breather could cause mass selling and turn borrower countries into pariahs. | In remarks to a United Nations group on Thursday, the president of the World Bank, David Malpass, did not directly address the predictions that a breather could cause mass selling and turn borrower countries into pariahs. |
| “Much more is needed, including longer-term debt service relief and, in many cases, permanent and significant debt reduction,” he said. | “Much more is needed, including longer-term debt service relief and, in many cases, permanent and significant debt reduction,” he said. |
| Mr. Malpass also said commercial creditors had to find a way to take part “and not exploit the debt relief of others.” | Mr. Malpass also said commercial creditors had to find a way to take part “and not exploit the debt relief of others.” |
| Mr. Gulati, the Duke law professor, said he wondered if any solution could be reached in time for borrowers to skip their June bond payments without being deemed to be in default. | Mr. Gulati, the Duke law professor, said he wondered if any solution could be reached in time for borrowers to skip their June bond payments without being deemed to be in default. |
| Decisions by the I.M.F., World Bank and G20 to let the countries skip payments will certainly free up cash, he said. But that doesn’t mean the countries will put it toward the costs of the public health crisis. If the private investors don’t get on board, the money could move into their pockets instead. | Decisions by the I.M.F., World Bank and G20 to let the countries skip payments will certainly free up cash, he said. But that doesn’t mean the countries will put it toward the costs of the public health crisis. If the private investors don’t get on board, the money could move into their pockets instead. |
| “That relief,” he said, “can be used to pay the private creditors on time and in full.” | “That relief,” he said, “can be used to pay the private creditors on time and in full.” |