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Next week, finance ministers, central bankers, and political leaders worldwide will gather for the World Bank Group and International Monetary Fund spring meetings to discuss the record number of developing nations at risk of a debt crisis.
A combination of ballooning inflation, escalating borrowing costs, and a strong dollar has made it increasingly expensive for dozens of developing nations to repay loans and raise money, causing several to default in 2022. Below are some countries facing a debt crunch or defaulting on international loans.
Egypt
Egypt's tourism-dependent economy has been affected by the one-two punch of COVID-19 and soaring food and energy prices, leaving it short of dollars and struggling to pay rising debts. It secured a new $3 billion IMF package in December 2022 by committing to a flexible currency, a greater role for the private sector, and a range of monetary and fiscal reforms. However, inflation now stands at over 30%, a five-year high.
El Salvador
El Salvador cleared a $600 million bond payment hurdle in January and has roughly $6.4 billion in outstanding Eurobonds. Although the next payment is not due until 2025, concerns about the country's high debt service costs, financing plans, and fiscal policies have pressed its bonds into the deeply distressed territory. Its move to make bitcoin legal tender in September 2021 closed the doors to IMF financing, but the risks over El Salvador's embrace of bitcoin "have not materialised," the IMF acknowledged.
Ghana
Ghana is in its worst economic crisis in a generation, spending over 40% of government revenues on debt payments last year. In January, it became the fourth country to seek a rework under the Common Framework. The West African country secured a $3 billion agreement with the IMF in December 2022, but it still needs to get financing assurances from bilateral lenders to clinch the final sign-off.
Lebanon
Lebanon's financial system began unravelling in 2019 after decades of mismanagement and corruption, and in early 2020, it defaulted. The country reached a provisional $3 billion IMF agreement in April 2022. Still, the fund recently warned that Lebanon was "in a hazardous situation" due to delays in various reforms, including banking and exchange rate overhauls. Beirut devalued the official exchange rate in February for the first time in 25 years.
Malawi
Malawi is grappling with foreign exchange shortages and a budget deficit of some 1.32 trillion kwacha ($1.30 billion), or 8.7% of GDP. The donor-dependent southern African nation is trying to restructure its debt to secure more funding from the IMF, which approved emergency funds in November.
Pakistan
Months of political and economic turmoil, worsened by crippling floods last year and record inflation, have put Pakistan in danger. While China agreed to refinance $1.8 billion already credited to Pakistan's central bank, talks with the IMF for a delayed $1.1 billion loan tranche, part of a $6.5 billion bailout agreed upon in 2019, has dragged on, and foreign exchange reserves have fallen to less than four weeks of imports.
Tunisia
Tunisia's tourism-dependent economy is in the throes of a punishing crisis that led to a shortage of essential food items. A $1.9 billion IMF loan has been stalled for months as Tunisia's president has shown little sign of action on key reforms. Most debt is internal, but foreign loan repayments are due later this year. Credit ratings agencies have said that Tunisia may default.