As U.S. nears 'soft landing,' we must help guide others out of the storm

Bloomberg News

Recently, Federal Reserve Chair Jerome Powell made a case that America's long-standing role as a democratic and economic standard-bearer is a critical pillar of American prosperity.

"[S]ince World War II, the United States has been the indispensable nation supporting and defending democracy, security arrangements, economic arrangements," Powell said. "It benefits our economy so much to have this role."

As market leaders and everyday Americans cautiously look to a light at the end of the inflation tunnel, Chairman Powell's work to achieve domestic economic stability seems to have had the desired effect. Even Treasury Secretary Janet Yellen stated that America may have achieved the elusive economic "soft landing."

But across the developing world, the landing has not been nearly as soft. Our global partners face enormous economic turbulence, in part a consequence of the sheer weight of our own domestic fiscal policy.

The World Bank recently rang the alarm on a growing "silent debt crisis" in emerging markets, with its 2023 International Debt Report highlighting a 20-year peak in sovereign debt defaults. Global investors have moved more than $50 billion out of riskier emerging markets to take advantage of higher U.S. interest rates, leading to a decrease in the value of local currencies in developing nations and increasing barriers to financing. As many of these nations seek to roll over debt in the coming months, many developing nations teeter upon a dangerous cliff of insolvency.

"For the poorest countries, debt has become a nearly paralyzing burden," the report says. As is almost always the case, the hammer falls hardest on the poor.

These countries now grapple with skyrocketing prices, a lack of financial support and supply chain issues. The economic distress placed upon these emerging markets forces the most vulnerable into impossible decisions, with those experiencing extreme poverty bearing the brunt of this burden.

As a global nongovernmental organization dedicated to financial inclusion efforts for the extreme poor, Opportunity International sees firsthand how this "silent" debt crisis has a very real impact on hundreds of millions around the world. Agricultural prices have increased by over 300% in nearly every market where we work. In countries like Ghana, where they face inflation at rates greater than 30%, small- and micro-business owners are unable to respond quickly enough to rising interest rates and cannot replenish stocks while still continuing to make a profit.

The global community must meet this increasing need with a diverse response to help guide the most vulnerable out of the storm. The World Bank itself recommends very specific solutions, like access to new debt exchanges, debt buybacks and other products that can help emerging markets manage portfolios before we face global catastrophe. Global leaders at last year's Paris Summit reiterated the need for private investors to renew their interests in developing markets and called for new partnerships to stimulate investment and provide flexibility for innovative financing that can reignite economies.

But none of this will happen without a standard-bearer to champion the cause.

Chairman Powell's comments this week underscore a cautiously optimistic outlook for the future of the American economy — but what of our global leadership and standing around the globe? As American markets begin our descent to that soft landing, we must also be mindful of our global partners still searching for a path out of the storm.

It is time we own up to our role as global economic leaders and shift our efforts to give voice to those suffering the silent debt crisis — a voice that investors and creditors around the world cannot ignore. In Chairman Powell's own words, it will benefit our own economy to do so.