Slowdown spells debt fears

For countries like Indonesia, more debt restructuring is going to be needed

The slowdown afflicting the global economy will prompt a worsening in the debt burden shouldered by poor countries, economic gurus have said.

The Economist Intelligence Unit has said that continued economic weakness into next year will leave emerging nations having to restructure debt to avoid defaulting on loans.

"Developments in the global economy will influence the risk of further debt restructuring in emerging markets in the short term," the EIU said.

The company rated Turkey and Indonesia as "likely" to require additional restructuring programmes in the 2002-3 financial year to avoid default.

Indonesia rescheduled $2.8bn of its debts in September, the 14th such agreement in 2001.

The report comes shortly after Argentina launched a complex and controversial effort to swap most of its $132bn in debt for longer term, lower interest loans.

While the Argentine plan is seen in some quarters as tantamount to default, pre-emptive restructuring is typically seen as positive, showing willingness on the part of the debtor to keep payments coming

Growing trend

Argentina's plight is an example of a growing trend of public debt restructuring in emerging markets, the EIU said.

The 21 restructuring deals made last year was the most since the Asian currency crisis of 1997, the unit said.

Others on the list include Ukraine, Pakistan - whose rejig came only in the wake of the 11 September attacks - Nigeria and Ecuador.

Private companies are going to have to revisit their debt, too.

"Heavily leveraged private companies in Asia and Latin America will struggle to cope with the adverse conditions and could easily be forced to restructure," the report said.