Hungry nations’ impossible choice: Pay debt or feed people

Hungry nations’ impossible choice: Pay debt or feed people

Bloomberg / London

After Sri Lanka defaulted on its debt, Jack McIntyre, a portfolio manager at Brandywine Global Investment Management, started watching rice and grain prices more closely.

For a swath of the markets he’s tracking, global food shortages are presenting governments with a stark choice — pay their debts or feed their people.

Sri Lanka opted for the latter, falling into arrears on its foreign debt on May 18 amid a lack of dollars to ease shortages of everything from food to fuel, and bets are high that others may follow.

Fifteen emerging market nations now trade with debt at distressed levels, or a risk premium of more than 10 percentage points.

Four of those nations are in Africa, where one of the steepest run-ups in food prices is taking a toll.

“The default in Sri Lanka made me nervous,” McIntyre said. “You don’t have to drive, heat your home, but you have to eat.”

With memories of the Arab Spring unrest in the early 2010s in mind, investors are fleeing emerging market nations threatened with crippling food shortages and uprisings.

Russia’s invasion of Ukraine disrupted vital supplies of food staples, adding to problems caused by extreme temperatures and elusive rain in breadbaskets from