Developing Nations Increase Borrowing
Developing nations (Emerging Markets countries) have flocked to the World Bank, of late, seeking loans at levels similar to what was seen during the financial crisis. Lending is on track to reach $150B in credit extended between 2013 and the current fiscal year. To ascertain whether this is a good or bad thing, an investor really has to look on a country-specific level. In the case of a country being a commodities exporter seeking loans to adjust ailing balance of payments, it’s more than likely a negative. On the other hand, countries seeking loans to take advantage of an attractive interest rate environment should be seen as advantageous – assuming that the return on borrowed assets is higher than the interest rate paid, borrow away.
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