Pakistan: The International Monetary Fund may have saved Pakistan from bankruptcy for now, but the economy is in dire straits. A similar $3 billion IMF bailout staved off a default in 2023, but the country, mired in political turmoil, needs another bailout this year. The latest multi-year $7 billion loan is a drop in the bucket, considering that at least 60% of tax revenue will be used to pay off old debt. In May 2024, the IMF estimated that Pakistan would need at least $123 billion in external financing through 2029. The countryâs GDP has fallen to $374.904 billion in 2023-24 from $375.44 billion in 2022. Despite the downward trend, inflation was at 9.6% in August. The pain will only get worse before it gets better. Foreign exchange reserves have returned to above $10 billion, including a $1 billion IMF loan, for the first time since April 2022, but that is not even enough to cover three months of imports.
Sri Lanka: The island nation defaulted on $83 billion in April 2022 when its foreign exchange reserves fell to just $50 million. Things are now returning to normal. Foreign exchange reserves are now at a three-year high of $5.95 billion. Inflation has fallen from 67% in September 2022 to just 1.1% in August 2024. GDP, after falling from around $94 billion in 2017 to $84.4 billion in 2023, grew between January and June 2024. The economy has stabilized after contracting 9.5% in 2022 and 2023. However, rising poverty and debt obligations could hamper the recovery. Sri Lanka defaulted two years ago. In September, the country reached a deal with creditors to restructure $12.5 billion in debt. Creditors will take a 27% cut as part of the deal.
Bangladesh: The countryâs total debt is $156 billion, up fivefold since 2008, and is rated âjunkâ by global credit rating firms such as S&P Global. The sovereign credit rating was downgraded even before the latest political crisis led to a regime change. As a result, the countryâs foreign exchange reserves have fallen from $32 billion in January 2023 to $20 billion in September 2024. The central bank has been devaluing the taka for the past few years, but so far it has had no effect. The Asian Development Bank expects inflation to rise to 10.1% in FY25, largely due to rising food prices. There are also concerns about a run on banks due to the growing number of outstanding loans. While there is no debt crisis at the moment, the economy is deteriorating and needs to be fixed quickly. The country has a $4.7 billion IMF-approved bailout, which will be disbursed over three and a half years ending in 2026.
Venezuela: The country's debt now stands at $154 billion, having started defaulting on its debt in 2017. Its GDP has fallen from $372.59 billion in 2012 to $102.33 billion in 2024. It was once the richest country in Latin America and is now in the throes of bankruptcy after a dictator declared himself winner in July, sparking political turmoil that threatens an already slow economic recovery. The economy grew 5% last year and is expected to grow 4% this year. The easing of global sanctions has contributed to the improved economic performance. The oil-rich nation is also in talks to restructure its debt. Meanwhile, 82% of the country's people live in poverty and while inflation is cooling, price increases are still 25% higher than a year earlier, according to the latest data from the central bank.
Argentina: This South American country has defaulted on its debt three times in the 21st century, owing more than $400 billion to creditors. It has had several debt restructurings in the past, most recently in 2023. Reforms by President Javier Milei have brought annual inflation down from 300% to 236% in eight months. But that is still high by conventional standards. The economy has also started to grow, albeit slowly. However, poverty levels have risen to 52.9%. Given the uncertain economic outlook, Oxford Economics predicts a 75% chance of default in 2025 and 2027.
Zambia: The southern African nation defaulted on its Eurobond in 2020. This year, it also became the first country to restructure $6.3 billion in external debt. But the country faces significant challenges. Its outstanding external debt is expected to reach 26% of GDP by 2023, which the IMF says is unsustainable. Furthermore, the country has yet to restructure at least $3.3 billion in commercial loans. The IMF believes that the failure to restructure the commercial loans and certain provisions in the 2024 debt restructuring agreement could put Zambia on the brink of default again.
Ghana: This African nation's total debt is $44 billionâ70.6% of GDP. The country defaulted on most of its external debt in December 2022, plunging the economy into crisis. Debt costs and inflation have soared. Ghana's foreign reserves have fallen from $9.7 billion in 2021 to $5.9 billion in 2023. The economy is now recovering, with GDP growth averaging 5.8% in JanuaryâJune 2024. Inflation has fallen to its lowest level since 2022. The IMF says its $3 billion bailout package, approved in May 2023, has helped the economy. The country's outlook looks brighter after a recent $13 billion debt restructuring deal. Creditors will write off 40% of the debt as part of the deal, the Financial Times reported.
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