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Sovereign Debt Vulnerabilities in Developing Economies

This paper analyzes debt vulnerability indicators across 120 developing (low- and middle-income) economies to identify vulnerable countries. The overall conclusion is that most vulnerable countries identified are not on the verge of a default, but rather risk facing a future of high economic and development costs of having to deal with large debt overhangs. A smaller group of countries will likely remain at high risk of defaulting this and in subsequent years, and in general uncertainties and risks are high. Much will depend on the strength of the economic recovery and continued access to and stability of financial markets.