A recent UN report revealed that more than 50 countries, mostly poor or developing countries, are at imminent risk of bankruptcy.
Although many more countries are struggling with this dire situation, we will examine only ten countries that are on the brink of bankruptcy.
1. Sri Lanka
Sri Lanka is the latest example of a state that is facing bankruptcy and is unable to pay its foreign loans. President Ranil Wickremesinghe has publicly admitted that the country is bankrupt and warned that the economic crisis will continue at least until the end of next year. The government, which has $51 billion in external debt, has declared default in April 2022 and is currently in talks with the IMF for a possible bailout.
2. Argentina
Argentina went bankrupt in 2001 when its debt exceeded 130 billion dollars. The combination of the peg of the peso to the US dollar, mounting public debt and rampant corruption has left the country ill-prepared to deal with economic shocks. Argentina defaulted on $100 billion, setting the record for the largest debt default in history. The roots of Argentina’s current problems go back to the late 1980s.
During that period, The New York Times reported that the South American country had a staggering 12,000% annual inflation. The government pegged its peso currency to prevent hyperinflation against the US dollar. While the move attracted foreign capital, it also made exports more expensive globally, limiting the government’s ability to combat currency appreciation.
3. Ukraine
Ukraine’s involvement in the long-running conflict with Russia has led to the country’s financial difficulties. Although the International Monetary Fund (IMF) approved Ukraine’s debt restructuring plan in March 2015, its credit rating has been downgraded.
Moody’s, an independent credit rating company, downgraded Ukraine’s rating to Ca, the second lowest level. This reduction has had a significant impact on lenders, with recovery rates ranging from 35% to 65% on loans. Unfortunately, the possibility of default on the national debt is almost inevitable.
4. Tunisia
There are many countries in Africa on the way to the IMF, but Tunisia appears to be one of the most vulnerable. The government runs a budget deficit of around 10% and holds the trophy for one of the highest public sector wage bills in the world. Now that’s a big bill! President Kais Saied is mixing power, tightening his grip and giving the international community a bit of a headache.
Sticking to the IMF program can be a tough nut to crack. The tension is also reflected in Tunisian bonds. They rose to 2,800 basis points. In fact, Tunisia joined Ukraine and El Salvador as the top three on Morgan Stanley’s list of potential defaulters.
5. Venezuela
Between September 2014 and January 2015, all major credit rating agencies downgraded Venezuela’s credit rating. Venezuela receives 94% of its income from oil exports. Thus, when fuel prices fell, the risk of default increased rapidly. The price of crude oil fell from an average of $88.42/barrel to $54.03 in December 2014.
6. Russia
Russia, a country of dramatic financial episodes, declared bankruptcy not once, not twice, but nine times throughout its history. The most recent was in 1998, with a debt of 17 billion dollars. Russia’s economy was reeling from the Asian financial crisis and declining demand for oil. Their international debts were piling up and national productivity was on the wane. And then, boom!
The Ruble Crisis of 1998 appeared on the scene. The Russian stock market took a huge plunge, losing 75% of its value, and inflation reached a staggering 80%. In repaying its debt to the IMF, Russia has struggled to repay just under $10 billion of the original $17 billion. As a result, the Russian economy experienced a sudden recession, causing the unemployment rate to rise to 13%.
7. Egypt
Egypt is an ancient wonderland (and sadly has a huge debt-to-GDP ratio). Egypt’s debt-to-GDP ratio of around 95% has attracted considerable interest from economists and investors, which has led to notable inflows of funds. Egypt has serious financial obligations. We are talking about $100 billion in hard currency debt that will be paid off over the next five years. If that wasn’t enough, there’s a $3.3 billion bond coming in 2024.
This is enough to raise an eyebrow from Cleopatra herself. To stabilize the situation, Cairo devalued the pound by 15% and asked the IMF for help in March 2022. But the market is still not completely convinced. Bond spreads have risen to more than 1,200 basis points and credit default swaps (CDS) are whispering a 55% chance of a payout.
8. Jamaica
Jamaica has seen some interesting credit rating adventures. Moody’s gave it a not-so-great rating of Caa2, but that’s an upgrade from Caa3. Even more surprising, Jamaica is rocking a positive outlook, which is unique for a country with such a low ranking.
9. Mexico
Mexico’s financial fiasco began in 1982 when it defaulted on an $80 billion government loan. The public debt increased due to the overly ambitious fiscal expansion programs of the Luis Echeverria administration. After the oil shock and deteriorating economic conditions, things were further shaken when the Mexican peso lost 50% of its value.
Even at half its value, the peso could not help Mexico pay its debts. So they defaulted on loans from the US and the IMF, which led to a series of unfortunate events.
10. Greece
When the global financial crisis hit in 2008, Greece was caught in a financial tornado. It hit hard, resulting in several large bailouts totaling €240 billion. In 2012, Greece took this step. They wiped out $138 billion of its debt, breaking the record for the largest sovereign default ever.
After the default, Greece went through a serious debt restructuring and even returned to the international bond market. Unfortunately, this recovery journey came with austerity measures and added to the already bleak financial difficulties facing many Greek residents. According to Statista, the average unemployment rate in Greece between 2012 and 2022 is 20.16%.
47 BUSINESS IDEAS TO EARN AN EXTRA $1,000 A MONTH
As inflation increases, it becomes increasingly difficult to make ends meet. Fortunately, today there are many options for making extra money. Here are 47 ways to earn an extra $1,000 a month.
47 TRADING WAYS TO EARN AN EXTRA $1,000 A MONTH
11 QUARTERS WORTH $10,000 or more
Have you checked your stock change lately? These 11 quarters may seem fairly generic, but they are worth serious money to collectors. Learn how to spot them!
11 QUARTERS WITH SERIOUS MONEY VALUE – $10,000 or more
Although society has made progress in some areas, many things were better in the past. Here are 10 things we wish would disappear in the name of “progress.”
The Decay of Our Society: 10 Things That Were Once Great and Lost Forever
10 U.S. CITIES SHUT DOWN ON ANNOUNCEMENT
While some urban centers are being reborn, others are rapidly dying. Here are 10 cities fighting for survival.
DYING CITIES: 10 U.S. CITIES THAT ARE SHINKING AT A REASONABLE RATE
We all get stopped by the police from time to time. Whether you think you’re right or wrong, here are some things you should never, ever say to a police officer when you’re pulled over (unless you don’t mind getting into more trouble).
12 THINGS NOT TO SAY WHEN PULLED DOWN BY THE POLICE
