As the shortage of dollars sweeps the globe, cracks are starting to show up in Asia's emerging markets, despite the hefty foreign reserve cushions built up over the years.
The squeeze on United States currency is putting pressure on emerging Asia debt. South-east Asian and Indian government and corporate payments are set to jump 67 per cent in 2022 to US$41.9 billion (S$60.6 billion), according to data compiled by Bloomberg.
Dollar payments are expected to peak at US$44.4 billion in 2024.
While the Federal Reserve has ventured into uncharted territory to fight a slowdown in the world's largest economy, Indonesia, Malaysia and India are raising red flags for analysts as the coronavirus pandemic shutters large parts of their economies, currencies plunge and governments push to widen their fiscal deficits.
It is all a wake-up call for emerging Asia, which has been seen as relatively sheltered compared with its peers globally, given flush foreign reserves, current account surpluses in many countries and regional swap lines to tap in crises.
"No one is facing imminent balance of payments pressure here," said Mr Christian de Guzman, senior vice-president at Moody's Investors Service in Singapore. "But given the way markets are right now, the option of refinancing for them may be a bit difficult. There's already some pressure on their local currencies. The cost of funding may have actually increased."
Indonesia and India are of particular concern, given the twin deficits on their budget and current accounts, which make them more reliant on foreign inflows than their peers.
Fiscal pressures are building in Indonesia, where the government is considering lifting its deficit cap to 5 per cent of gross domestic product (GDP), from 3 per cent.
The central bank is predicting the current account deficit will come in at 2.5 per cent to 3 per cent of GDP this year, and foreigners own 35 per cent of Indonesian local-currency government bonds, among the highest in Asia based on available data.
The rupiah has taken a beating, weakening about 16 per cent against the US dollar so far this year, making it the worst-performing currency in Asia. That will put pressure on firms refinancing their dollar debt, said Mr Xavier Jean, senior director for corporate ratings at S&P Global Ratings in Singapore.
"The credit quality of Indonesian companies as a whole has been steadily declining over the past three years because of steady capital spending, growing debt, intense competitive pressure and more challenging operating conditions, especially in the real estate sector."
Almost one-third of the credit ratings in the Indonesian corporate sector, excluding state-owned firms, are on negative outlook - signalling further deterioration in their credit profile over the next three to 12 months, he said, adding that is the highest level since the global financial crisis.
The yield on Indonesia's benchmark 10-year bond has climbed to 8.38 per cent, the most since 2018, while that on Malaysia rose to 3.58 per cent, near an eight-month high.
In India, similar pressures are building. Global funds have sold net US$7 billion of rupee-denominated debt so far this month till Monday inclusive, based on data compiled by Bloomberg.
The rupee has plunged to an all-time low and stocks fell by a record on Monday after the government moved to lock down the country.
The market sell-offs show Indonesia and India as being the "most, and increasingly, troubled", said Mr Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. Currency plunges and external debt servicing are problems that could compound one another, he added.