If there is one thing everyone around the world can agree on is there is greater debt than there was before COVID, governments around the world have increased their debt levels. Bondholders of the debt will have an increasingly large say about the activities of many countries, unless the world comes together to repay the debt.
In an article by Rodney Muhumuza of the Associated Press, one of the countries in Africa is Zambia and it is important to the world because it is one of the world’s top producers of copper. If you remember early in the year, the Group of 20 said public debt would not have to be paid for a while and freed up $20 billion for low income countries. The countries are seeking an extension of paying debts.
However, $3 billion in debt held by investors including China is coming due and what will the G20 do? In the past few years, China has been increasing its presence in the African economy including raw materials and holds about 1/3 of the sovereign debt and the world is wondering what influence will China have. According to Nathan Hayes, an analyst with the Economics Intelligence Unit in 2021, $20 billion in private obligations as well as $14 billion in bilateral debt is coming due.
Linking to dividend paying stocks, for generations American and European investors have counted on their governments to the backstop to their investing outside of their countries and institutional solutions have evolved. China is the new player and they have different interests, although everyone follows the same formula Good Sold – Costs equals Profits. If there are profits then dividends can be paid and all is good.
There are more questions than answers, till the next time – to raising questions.