List of Highest Default Risk Countries

Highest Default Risk Countries- The Riskiest Economies

We have seen Venezuela default in 2017 due to economic stagnation, Greece and Lebanon default due to high budget deficits and debts, and Argentina default due to political instability in 2014. Here, we will discuss the top 10 countries with high default risk and the reasons behind this.

Key Highlights

  1. Overspending by the government, tax cuts, and even diplomatic relations can put countries at risk of default.
  2. According to the World Economic Forum, 147 countries have defaulted on their debt since 1960.
  3. Two major impacts of sovereign debt are rising inflation and the unemployment rate.

Which countries have the highest default risk?

1. Argentina

Argentina is a world record holder of sovereign bonds. Its peso’s value has dropped to 50% in the black market. And the country is struggling with a 113% rise in annual inflation. The country is only left with foreign reserves that China grants. Policymakers in Argentina are trapped between printing pesos to cover government bills and avoiding hyperinflation. Argentina is the IMF's largest debtor, with a debt level of $ 370 billion (all included).


Argentina has faced many economic challenges, and one particular reason may be the decline in President Macri’s popularity. In the 2015 election, investors were hopeful about Macri’s Presidency, but the result lost all investors' confidence, and in 2018, investment started to decline. From here, Argentina borrowed $57 billion from the International Monetary Fund. Again, due to Argentina's inability to meet its obligation, the value of the Argentine peso against the US dollar started to decrease. Argentina's economy is mainly based on commodity exports, and this dependency proved unfavourable for the country. Also, the country accumulated more debt for its social programs, which created economic challenges. 

2. Ukraine

Ukraine is running out of its budget deficit due to the Russian invasion, which is making it rely on external financing. Ukraine urgently needs to accelerate its financing reforms because any reduction or delay in financial support will threaten its economic and even currency stability, which can complicate its debt help. Ukraine is experiencing a one-third decline in its gross domestic product in 2022. Inflation rose to 226%, and the interest rate rose to 25%. The economic impact of the War has put Ukraine under significant financial stress. 


The immediate cause of Ukraine being one of the default risk countries is the Russian invasion. This resulted in borrowing 40 billion Euros in 2023 and 20 billion euros of deferred payments on its debt in 2024. Europe Union has provided a significant loan to Ukraine, which will eventually have to be repaid as 2033 begins. Indeed, the European Union is not learning from its historical lessons while financing Ukraine. In contrast, the United States has provided significant non-repayable grants to Ukraine in times of crisis, which was more expected from the EU.

3. Egypt

Egypt is North America's highest economic country and needs to pay around $100 billion in hard currency debt in the next five years. Egypt has spent about 40% of its revenue on paying its interest. If you look at its financial needs for 2023 and 24, it is about $24 billion. Egypt has been under a $3 billion IMF program since February 2022. Here, the IMF devalued its currency by roughly 50%. Despite these relief programs offered by the IMF, Egypt still needs to implement the $2 billion privatisation initiative. It has again postponed its electricity subsidies, adding to the complexities of the economic situation. This implies that Egypt needs to take proactive or challenging measures to control its economic issues.


Egypt is in a challenging situation, running out of its current deficit. It means its imports exceed its exports, requiring capital flow to finance these deficits. Egypt has financed those deficits with very short-term debts, challenging the market's risk sentiments. Due to volatility in the global market in 2022 that arose due to geopolitical risk, the US government tightened its monetary policy, which again led to capital outflow across different emerging markets. Well, this outflow should have been suitable for Egypt, but that turned harsh and problematic due to the fixed exchange rate adopted by Egypt. When these outflows were big, Egypt spent its reserves very quickly. This affected the market perception that it may be unable to repay its future foreign currency debt.

4. Ethiopia

Ethiopia is on the brink of default. It was one of the African countries with the most promising economies but is now struggling to pay its debts. Recently, its finance minister announced that the country needs to be able to pay a $33 million bond interest payment due on December 11, 2023. This event triggered Ethiopia to be on the default risk countries list.


In November 2020, a civil war in Tigray was launched when the Ethiopian army attacked Tigrayon troops who seized a military base in Mekelle. Well, this should not have been the immediate cause of economic failure in a country like Ethiopia. Still, human rights activists and critics in Ethiopia have pointed out that this civil War had a significant economic impact. 

5. Ghana

Ghana was one of Africa's most democratic and fast-growing states but is now on the verge of default. In 2022, Ghana defaulted on most of its external debt, which shows it is facing the worst economic crisis of the generation. It is now the fourth country to see the revoke under the common framework. It has an external debt of $30 billion and an unknown domestic debt. To help Ghana with this problem, the IMF bailed out its $3 billion. The country is facing inflation, where living costs, unemployment and economic hardships are rising.


Ghana's economy primarily depended on cocoa and gold exports and external financing. However, the COVID-19 pandemic made Ghana a victim of its economy. Ghana still needs to fundamentally restructure its economy, and people cannot determine their political destiny. They need to learn how to use their natural resources for their benefit.

6. Kenya

The East African nation Kenya has a public debt of around 67.4% of its GDP. Kenya needs to pay $2 billion in Eurobonds next year and is seeking help from the African Development Bank and the World Bank. The Kenyan citizens have already started feeling the pressure of inflation and currency depreciation, demanding the government reduce its expenditure and wastage.


If we look at Kenya's total borrowings, 64% are from Chinese loans, and 17% are external public debt. These are Kenya's current bilateral external debts. World Bank is the single and only largest external creditor to Kenya. Despite having the World Bank, Kenya cast around for China. This shows that Keyna has a legacy of making poor decisions and planning. Though Chinese lending is one component of Kenya's default risk, the decision to borrow from external creditors raised its debt-to-GDP ratio from 42% to 69%. 

7. Pakistan

Pakistan requires $22 billion to clear its external debt and even cover its expenses for 2024. It has a total external debt of $226 billion. It is the highest level of debt, which is putting considerable financial stress on the country, and if Pakistan wants to avoid default, it needs more funding. Today, Pakistan is experiencing a historic high in inflation and interest rates. High inflation has eroded the purchasing power of the Pakistani rupee. However, Pakistan was fortunate to secure a last-minute $3 billion IMF bridge loan in June and even received $3 billion of help from Saudi Arabia and the UAE.


Pakistan is an import-dependent economy. Moreover, political instability in the country is the biggest reason for its economic crisis. It spends a huge amount on buying defence products, mainly from China. Pakistan has defaulted on many grounds. Many people use informal means to send money outside the country, large businesses are leaving the country, and Pakistanis are migrating in large numbers to find work outside Pakistan.

8. Tunisia

Tunisia is facing fiscal challenges. The government's wages and benefits account for about 70% of the revenue generated from the state. If Tunisia defaults, it will result in a shortage of essential medicines. The currency exchange rate will ultimately collapse, and investors' confidence will decline. This will force Tunisia to impose more taxes, resulting in a banking crisis similar to Lebanon's.


Similarly to Lebanon, Tunisia is facing political instability linked to corruption, nepotism, and ineffective decision-making measures, which has significantly impacted its economic stability. By the end of 2020, Tunisia’s foreign debt reached $41 billion. The COVID-19 pandemic and the Ukraine crisis added oil to the heat, which widened the country's budget deficit.

9. El Salvadore

El Salvador had an 80% debt-to-GDP ratio by the end of 2020. This put a considerable burden on its economy. Forecasts suggest that the public debt could reach 98% of its GDP in 2027. The country is even recommended to increase its expenditure in the 2024 presidential election.


The COVID-19 pandemic led to a rapid increase in public debt. The government has a significant investment plan to fulfil its ambitious goal of doubling the size of its economy by 2025. In 2021, El Salvador adopted Bitcoin as a legal tender, adding unique challenges to the country's economy. Its volatile value, the potential impact on fiscal accounts, and the significant expenditure of funds to convert Bitcoin and US dollars again heightened the situation.

10. Belarus

Belarus is facing default on its government bonds, particularly those of $800 million that matured in February. The Euroclear, the securities depository, marked those bonds as matured rather than defaulted. Many credit rating agencies like Moody's, S&P and Fetch declared Belarus in default on sovereign bonds last year. 


Belarus is one of Russia's closest allies, and the United States and the European Union have banned Belarus from paying its debt holders. The European Union even responded against Belarus by putting sanctions that limited the financial inflow from Belarus as many Belarusian banks are blocked in this country.

Final Words:

Going into default is a nightmare for any country, but it is not just the beginning because we have witnessed many countries that have damaging impacts after the default. Argentina is one of those countries that defaulted on its sovereign bond debt and is now playing the blame game with America. Greece, Iceland, Venezuela, and, most recently, Sri Lanka are a few examples of governments failing to make proper decisions and letting their citizens suffer. The above-mentioned 10 high default risk countries have started their countdown clock ticking away.

Also Read:

  1. Is recession Coming?
  2. Global Economic Recession
  3. Will world Economy Get better in 2024

olivia Johnson 24 Jun, 2023


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