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IIF: Frontier markets face rising funding gaps

Published 20/05/2020, 15:59
Updated 20/05/2020, 16:00

LONDON, May 20 (Reuters) - A number of frontier market
countries are facing rising funding gaps with Nigeria standing
out as a high-risk case, the Institute of International Finance
(IIF) said in its latest report.
Assessing the external financing needs of smaller, often
riskier developing countries, the IIF report found that external
funding needs of these frontier economies were lower than those
of their larger emerging market peers. However, buffers in the
form of FX reserves also were weaker than those of major
developing countries, the IIF said.
"In the near-term, financing needs will rise mostly due to
widening current account deficits, while debt service gets
heavier in the medium-term," IIF deputy chief economist Sergi
Lanau said in a note to clients.
"External risk will thus rise but will not generally reach
the levels seen in the 1990s, when debt distress materialized in
many frontier markets."
Lanau noted that buffers were limited in Ethiopia and
Zambia, as well as Mongolia. On the other hand, Uzbekistan,
Honduras and Ivory Coast enjoyed a more comfortable level, he
added.
"Nigeria stood out as a high-risk case where a large funding
gap is likely," Lanau added.

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