Foreign currency shortage deepens crises in indebted countries

With diminishing expectations that the US Federal Reserve will rein in tightening, the value of the dollar rose, while developing countries with high debt burdens were left with severe shortages of foreign exchange.

Economists had hoped that the difficulties facing countries with financial problems could be resolved this year, but with the recovery of the dollar, the pain in these markets also deepened.

THEY KNOW THE DOOR OF THE IMF

The shortage of dollars began to prevent access to everything, from raw materials to medicines in underdeveloped countries. Governments continued to grapple with debt problems while seeking bailouts from the International Monetary Fund (IMF).

According to a report published in the US financial agency Bloomberg, some Sri Lankan hospitals delayed surgeries due to the crisis in products such as raw materials and medicines, while international flights were suspended in Nigeria. In Pakistan, some car factories were closed.

FACTORIES CLOSED, OPERATIONS STOPPED

In Pakistan, factories have stopped operating in recent months as the currency available to import raw materials has run out. In the South Asian country Sri Lanka, the government has set a fuel limit of 20 liters per person per week, while public hospitals postponed non-emergency surgeries due to shortages of medicines and medical supplies.

In Bangladesh, another South Asian country, energy producers began seeking $1 billion in foreign currency from the central bank to import fuel to avoid an impending energy crisis. Although imports decreased due to the dollar crisis in the East African country of Malawi, this situation generated the problem of medicines, fertilizers and diesel.

LOSSES OF HARD VALUE CURRENCY

Hasnain Malik, emerging markets strategist at Dubai-based financial firm Tellimer, said: “A real crisis is brewing in troubled countries, and for some, things could get worse. Investors need to assess risk and be more careful not to get caught up in countries like Ghana or Sri Lanka,” he said.

JPMorgan’s Next Generation Markets Index, which tracks dollar debt from developing countries, fell 0.4 percent last month, its fastest decline since September. With the dollar’s recent vitality, the currencies of Ghana, Egypt, Pakistan and Zambia have lost much more value this year compared to their counterparts.

THEY ARE IN THE BEST OF Default

John Marrett, a senior analyst at the Hong Kong-based Economist Intelligence Unit, said: “These countries are mired in economic collapse and some countries like Pakistan are on the brink of another default. The value of the coins is also much lower,” he said.

Although nearly 20 countries are queuing up for IMF help, their debt negotiations are progressing slowly. This year, many indebted countries, including Egypt, Pakistan and Lebanon, have seen sharp devaluations as they seek bailout funds.