08 December 2015
Emerging economies are at risk of a major debt crisis as the United States Federal Reserve considers raising its interest rate for the first time since the financial crisis, says UNCTAD in its latest Policy Brief.
The latest UNCTAD Policy Brief highlights the net outflow of capital from emerging economies and the implications for macroeconomic stability. With reduced policy space due to the liberalization of financial markets and capital accounts, emerging economies might face growing external and internal imbalances.
Key points:
Developing countries are currently experiencing their fourth dip in capital inflows since the financial crisis of 2008.
Currency swap arrangements offer an immediate option for alleviating liquidity shortages.
Regional monetary arrangements to provide countercyclical financing also offer a promising alternative.
Another option is the creation of a common regional fund with periodic increases in paid-in capital.
Aggregate net capital flow and weighted exchange rate index for selected emerging markets
