IMF warns on EM debt defaults and liquidity 'evaporation' when rates rise

Increase in corporate failures

Laura Dew

The International Monetary Fund(IMF) has issued a series of warnings for markets when US rates eventually rise, cautioning they could cause emerging market corporate defaults and a loss of liquidity.

According to the Telegraph, the IMF highlighted corporate debt in emerging markets has grown from $4trn in 2004 to $18trn last year, accompanied by weaker balance sheets which leave many companies vulnerable. Take two: Emerging markets insulated from global woes "As advanced economies normalise monetary policy, emerging markets should prepare for an increase in corporate failures," the IMF said in a pre-released chapter of its latest Financial Stability Report. The body also warned market liquidity, particularly in bond markets, was likely to "evaporate" once interest rates rise. W...

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