Leaders | Debt in developing countries

Emerging-market crises have become harder to resolve

But less of a threat to the world economy

COLOMBO, SRI LANKA - JULY 18: Men sit on an empty pushcarts as they seek work in a market amidst the current economic crisis on July 18, 2022 in Colombo, Sri Lanka. After months of sustained street protests over the country’s economic collapse, Sri Lanka’s parliament will elect a new president who will serve the rest of the current term after president Gotabaya Rajapaksa fled the country. (Photo by Abhishek Chinnappa/Getty Images)

Jul 21st 2022

Whenever america’s Federal Reserve raises interest rates, investors reflexively worry about a crisis in emerging markets. Today it might appear the usual pattern is playing out. On July 27th the Fed is expected to raise rates by another three-quarters of a percentage point. Meanwhile, Sri Lanka has run out of foreign exchange, Argentina faces another default and many poor countries are in trouble. Look more closely, however, and the world economy has been transformed in ways that mean the nature and consequences of emerging-market turmoil have changed.

This article appeared in the Leaders section of the print edition under the headline “Progress and poverty”