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Global indebtedness has never been greater than it is today. With interest rates so low for so long, anyone who could borrow has done so. But, even with rock-bottom borrowing costs, the economic fallout from the pandemic has forced one vulnerable country after another to declare sovereign default, or to signal that it may do so soon. Worse, the main creditor to debt-distressed emerging economies, China, has little experience managing cascading sovereign defaults.

On Nov. 13, Zambia became the sixth country to default on its sovereign bonds this year (following Argentina, Belize, Ecuador, Lebanon, and Suriname). Others are likely to follow. Fitch Ratings now gives 38 sovereign bonds a B+ or worse, where B denotes a “material” risk of default.

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