October 12, 2008
Nuclear-armed Pakistan is bleeding foreign reserves at an alarming rate leading to fears that it could default on its loans.
- A d v e r t i s e m e n t
There are mounting fears that Ukraine, Kazakhstan, and Argentina could all now slide into a downward spiral towards bankruptcy, while western banks exposed to property bubble across Eastern Europe have seen their share price crushed.
The markets are pricing an 80pc risk that Ukraine will default, based on five-year credit default swaps (CDS) – an insurance policy on a country being able to pay its debts.
The country’s banking system has begun to break down after years of torrid credit growth; its steel mills are shutting as demand collapses; and the political crisis is going from bad to worse.
President Viktor Yushchenko dissolved parliament this week in a dispute that risks bitter conflict with the country’s Russian bloc. Diplomats fear Moscow could be drawn into the crisis – or even use it as a pretext to occupy territory in a replay of the Georgia invasion this summer.
Ukraine’s government seized Prominvestbank this week, suspending payments to creditors. It closed the Kiev stock market, which has fallen 73pc this year.