o:32414 Global Financial Fragmentation and External Debt Sustainability of Developing Countries en Abstract The international trade fragmentation and the rise of protectionism are fuelling the fragmentation of financial markets, which increases the cost of funding financial resources. The role of the US dollar in invoicing world trade is declining. There are disturbances in the functioning of the international monetary system (freezing of foreign exchange reserves as a form of financial sanctions, for example). New mechanisms and instruments of international payments, which are expected to reduce costs, as well as the growing use of cryptocurrencies and changes in US monetary policy, weaken the dominant position of the dollar in the international monetary system. The rising U.S. and other developed countries' interest rates increase the cost of servicing the external debt of developing countries. The share of short-term debt in the structure of the total external debt of developing countries is increasing. Due to the change in the structure of the external debt of developing countries and due to the increase in interest rates on the international capital market, the costs of servicing the external debt of developing countries are increasing. The burden of servicing the external debt is growing because more foreign currency is needed to meet external public debt obligations, and the share of external repayments in government revenues is also increasing. The external insolvency and illiquidity risks in these countries are increasing. The sensitivity of developing countries to external shocks is increasing. Some countries are serious candidates for restructuring the repayment schedules. It is necessary to quickly approach the consolidation of the external debt of those developing countries in order to avoid chain effects. The poorest developing countries have the strongest difficulties with external debt sustainability. The paper analyses the level of external indebtedness of developing countries and the external debt sustainability in the environment of growing protectionism and fragmentation of the international capital market. Keywords: Financial fragmentation, external debt service, external debt sustainability, developing countries 1552100 978-605-72639-8-8 2024-01-19T11:12:25.093Z 44 no 46 Radovan Kovačević Univerzitet u Beogradu Ekonomski fakultet 0000-0002-5857-730X application/pdf 345609 https://phaidrabg.bg.ac.rs/o:32414 no yes 18 70 92000004 11A03 18th SCF International Conference on “Sustainable Development in a Global Perspective” 76 86 2023