The U.S. economy is in danger of entering a recession as a result of the Federal Reserve’s efforts to combat inflation. They might also lead to a string of financial catastrophes in developing nations all over the world.
Many emerging economies are finding it more expensive to repay the crushing debt they accrued in order to survive the pandemic as a result of higher interest rates. Additionally, the cost of necessities like food and petrol has skyrocketed as a result of the conflict in Ukraine.
That’s bad news for dozens of nations, including Ghana, Kenya, Pakistan, and El Salvador, whose public finances are in grave danger. Even for some larger emerging markets with underlying economic issues, like Turkey, the position is still precarious.
Even in some relatively strong developing markets, there is undoubtedly a fragility that might interact with tighter financial conditions in a way that causes some stress, according to Tobias Adrian, director of the International Monetary Fund’s monetary and capital markets department.
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