1. Pakistan: Continuous Bailouts Amid Economic Chaos
Pakistan has narrowly avoided default multiple times, thanks to the International Monetary Fund (IMF). The IMF's $3 billion bailout in 2023 averted an immediate crisis, but Pakistan remains in deep economic turmoil. With a further $7 billion multi-year loan, the country is only buying time as 60% of tax revenue goes to debt repayment. The IMF estimates that Pakistan will need $123 billion in external financing by 2029. Despite forex reserves of over $10 billion, inflation remains at 9.6% as the country's GDP stagnates at $374.9 billion in 2023-24.
2. Sri Lanka: A Slow Recovery Post-Default
Sri Lanka defaulted on its $83 billion debt in 2022 when its foreign exchange reserves plummeted to $50 million. The country’s situation is improving, with reserves now at $5.95 billion, inflation down to 1.1%, and positive GDP growth in the first half of 2024. However, with rising poverty and ongoing debt obligations, recovery remains fragile. Sri Lanka recently reached a deal to restructure $12.5 billion in debt, with lenders agreeing to a 27% haircut.
3. Bangladesh: Growing Debt and Rising Inflation
Bangladesh’s total debt has surged to $156 billion, with its sovereign rating downgraded amid political and economic turmoil. The country’s forex reserves have dropped to $20 billion, and inflation is expected to rise to 10.1% in FY25. Though the economy hasn’t yet collapsed, the $4.7 billion IMF lifeline is crucial to preventing further economic deterioration. The country’s debt burden continues to worsen, and further measures may be needed to stabilize the situation.
4. Venezuela: Economic Collapse and Debt Default
Once Latin America’s wealthiest nation, Venezuela has seen its GDP collapse from $372.59 billion in 2012 to $102.33 billion in 2024. The country has defaulted on most of its $154 billion debt since 2017, and its political crisis is hindering recovery. Venezuela’s inflation has cooled somewhat, but prices remain 25% higher than a year ago, with 82% of the population living in poverty. Despite some economic improvements, restructuring Venezuela's enormous debt remains a significant challenge.
5. Argentina: At Risk of Another Default
Argentina has defaulted on its sovereign debt three times in this century and now owes over $400 billion. Inflation has dropped from 300% to 236% under recent reforms, but poverty remains above 52.9%, and the economy is growing slowly. Analysts warn there is a 75% chance Argentina could default again by 2025-2027, despite recent debt restructurings. The country’s financial stability remains highly uncertain.
6. Ghana: Navigating Debt Restructuring
Ghana defaulted on most of its $44 billion external debt in December 2022, causing a significant economic crisis. However, the IMF’s $3 billion bailout in 2023 and recent GDP growth of 5.8% indicate a recovery is underway. Ghana has also restructured $13 billion in debt, with creditors accepting a 40% haircut. While the country is stabilizing, its ability to manage future debt obligations will be crucial.
7. Zambia: On the Verge of Another Default
Zambia defaulted on its Eurobond debt in 2020 and restructured $6.3 billion of external debt in 2024. However, with external arrears at 26% of GDP, Zambia remains vulnerable to further economic crises. Failure to restructure another $3.3 billion in commercial loans could lead to another default, according to the IMF. Zambia’s economy remains precarious, and sustained economic reforms are needed to prevent further collapse.
Conclusion
As these seven nations struggle with soaring debts, economic instability, and inflation, international institutions like the IMF play a critical role in preventing defaults. While some countries, such as Sri Lanka and Ghana, show signs of recovery, others, like Venezuela and Argentina, face a more uncertain future. The global community continues to monitor these nations closely, as their economic fates have significant implications for regional and global stability.
