RI ranks high for likely debt defaults

RI ranks high for likely debt defaults

LONDON (Dow Jones): Defaults by sovereign governments declined in the first quarter of 2000 amid generally benign financial conditions in emerging markets, Standard & Poor's said in a report.

But Romania, the Ivory Coast, Zimbabwe, Nigeria and Indonesia top the list of possible default scenarios, the ratings agency said.

Defaults on local-currency debt in the first quarter declined to levels last seen in the early 1990s, it said.

The value of debt in default fell to an estimated $66 billion in the first quarter, from $102 billion in the prior two years, S&P said.

No new issuers defaulted during the first quarter, the agency said, and the decline in the value of the debt in default came via restructurings by Pakistan, Ecuador, Mongolia, Russia and Ukraine.

But "new defaults may loom on the horizon later this year," the agency said. Zimbabwe, the Ivory Coast and Romania "are vulnerable due to their fragile fiscal and foreign-exchange positions," S&P said.

Meanwhile, Indonesia and Nigeria are less financially distressed, but their high debt burdens still make them candidates for private-sector burden-sharing imposed by the Paris Club of official creditors, the agency said.

S&P noted that creditors and debtors are restructuring debt "more quickly than was typical in earlier years."

"This represents an important milestone, one that will continue to be tested if sovereign defaults increase over the decade, as Standard & Poor's expects," the agency said.

"The market's evident capacity to manage debt workouts may have an ironic consequence by reducing the impetus to global financial architecture reform," it said.