FX.co ★ Top worst defaults of our time

Argentina

This Latin American country defaulted during the COVID-19 pandemic. In May 2020, Argentina failed to make a $500 million interest payment on foreign debt. It actually came as no surprise to creditors. Indeed, the country has already declared bankruptcy 8 times. In fact, the previous 2 defaults occurred relatively recently – in 2014 and 2001. The latter of these crises was the worst in the history of Argentina, and its fallouts were the most damaging. In the early 2000s, the country’s bond debt totaled $95 billion, inflation soared by 40%, and GDP collapsed by 11%.

Ecuador

Throughout its history, this South American state has also been through many financial crises that led to bankruptcy. Today, Ecuador is the world leader in the number of sovereign defaults. Not so long ago, the country saw its credit rating falling. It took place during the COVID-19 pandemic. Back then, Ecuador’s authorities announced a temporary suspension of payments on external obligations. Yet, Ecuador’s worst debt crisis took place in 2008 after the oil shock. The country owed about $10 billion to bondholders, banks, and international organizations, which totaled 20% of its GDP.

Jamaica

In the aftermath of the 2008 global financial crisis, Jamaica also defaulted. In 2009, the country’s government debt amounted to more than 140% of its gross domestic product. Jamaica spent about 45% of the state budget on paying off its debt obligations. Already in 2010, the country declared bankruptcy. By that time, its sovereign debt had increased to almost $8 billion.

Ivory Coast

This West African country defaulted in 2011 in the wake of an acute political crisis. In November 2010, Ivory Coast President Laurent Gbagbo refused to let go and remained in power after losing the presidential election. His decision to close state borders resulted in a sharp decline in economic growth. Eventually, the world’s largest cocoa producer was no longer able to pay off its debt obligations. In the spring of 2011, when Mr. Gbagbo was arrested, Ivory Coast's external debt exceeded $2 billion.

Greece

Greece faced sovereign debt problems back in 2008. The country, whose economic growth relies on tourism, turned out to be very sensitive to the global financial crisis. In addition, the situation got even worse due to constant statistics juggling. For several years, the Greek authorities downplayed the budget deficit. Consequently, the country suffered a sovereign debt crisis twice in 10 years – in 2012 and 2015. The country accumulated a debt of more than €260 billion in 2012. Already in 3 years, the state owed €131 billion.

Sri Lanka

The latest default that triggered a wild frenzy in the market took place in Sri Lanka. In the wake of two COVID-19 waves and a surge in global inflation, the tourism-based economy fell short of foreign currency. Sri Lanka's public debt exceeded $45 billion in April 2022. The government had no choice but to suspend payments to creditors. Currently, the authorities see imports of essential goods to the country, and not the payment of debt obligations, as their main priority.