IMF Sees Rising Risks for Emerging Markets’ Corporate Debt

Years of cheap credit have inflated corporate and sovereign debt in emerging markets that now find themselves at greater risk of capital flight if global interest rates rise further, the International Monetary Fund said.

While the IMF predicts a smooth withdrawal of monetary stimulus by the Federal Reserve, a “bumpy exit” is possible, Jose Vinals, the head of the IMF’s capital markets department, said in prepared remarks. The result could be a faster-than-anticipated increase in interest rates, widening credit spreads and greater financial volatility, he said.