Colombia is among the 25 countries with the highest risk of defaulting on their sovereign debt in the world, according to a report by Visual Capitalist based on data compiled by the Bloomberg agency.
The country was ranked 23rd in the world ranking with the highest risk due to unpaid debts, which are equivalent to 60.6% of GDP, which is considered a high level by historical standards, but has recently become normal. after the pandemic.
The list takes into account the debt vulnerability classification that each country registers, data that is based on four metrics: government bond yields, the five-year credit default swap spread, interest expense as a percentage GDP and public debt as a percentage of the same indicator.
El Salvador is the country with the highest risk of defaulting on its sovereign debt this year globally. According to the study, said country has been compromised by the collapse of the prices of cryptocurrencies, and especially bitcoin, which was legalized as legal tender a year ago.
In this case, the Central American country ranks first for its high interest spending and total government debt, which comprise 4.9% and 82.6% of Salvadoran GDP, respectively.
Compared to a nation that is healthy or strong enough to weather crises like the US, there is a wide gap as federal interest costs were just 1.6% of GDP in 2020.
El Salvador could be only six months away from default, considering that in January 2023 its US$800 million sovereign bond will mature and it is not yet clear whether it will manage to get out of said financial mess.
Other Latin American countries that are also at high risk of default are Argentina, in seventh place, Brazil (11), Costa Rica (16), Ecuador (19), the Dominican Republic (21) and Mexico (25).
Globally, the economies with the highest probability of default behind El Salvador are Ghana, Tunisia, Pakistan, Egypt and Kenya. There are only two European countries present in the world ranking: Ukraine, due to the war with Russia, and Turkey, due to the economic crisis facing the country.
Russia and Sri Lanka, the countries that already entered into default this year
In May 2022, the South Asian nation of Sri Lanka defaulted on its debt for the first time. The country’s government was given a 30-day grace period to cover US$78 million in unpaid interest, but ultimately did not cancel. Meanwhile, just over two weeks ago, Russia also defaulted on its debt for the first time since 1918. In the end, the grace period on some $100 million in interest expired.