Sovereign Default in 2024

Since 2014, the Bank of Canada (BoC) has maintained a comprehensive database of sovereign defaults to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default.1 The database draws on published datasets compiled by various public and private sector sources. It combines elements of these sources with new information to develop comprehensive estimates of stocks of government obligations in default. These include bonds and other marketable securities, as well as bank loans and official loans, valued in US dollars, for the years 1960 to 2023, on both a country-by-country and a global basis.

Highlights

The total value of sovereign debt in default fell by 1% last year

Our preliminary estimate of the total value of sovereign debt in default is US$523?billion in 2023, or 0.5%?of global public debt. This is a decrease of US$7?billion, or 1%, from the revised total of US$530?billion in 2022. At the same time, we estimate that the number of sovereigns in default declined from 98 to 92. That said, tighter financing conditions impacted many Heavily Indebted Poor Countries and emerging-market and frontier sovereigns. By contrast, debt in default among advanced-economy sovereigns fell to zero last year after Puerto Rico finished its debt restructuring in 2022 and the United Kingdom repaid a long-standing obligation to Iran.

Defaults to official external creditors rose by 6% in 2023

Loans in default to official creditors increased by US$12?billion, or 6%, between 2022 and 2023, to US$215?billion but the major sub-groups of creditors each fared differently (Chart?1).3 For only the second time since 1974, there were no defaults to the International Monetary Fund. By contrast, defaults to the International Bank for Reconstruction and Development and the International Development Association—which form part of the World Bank Group—and the Inter-American Development Bank rose collectively by US$0.3?billion or 8%, to US$4.5?billion. Among bilateral creditors, identified defaults to China rose by US$10?billion, or 28%, to nearly US$50?billion, while defaults to the Paris Club remained around US$78?billion. Defaults to other official creditors (bilateral and multilateral creditors we have not identified separately) rose by US$0.8?billion, or 1% to US$82?billion.

Note: LC is local currency, and FC is foreign currency. IADB is Inter-American Development Bank. See footnote 2 for more information on the Paris Club group of lenders. Other official creditors are bilateral and multilateral creditors not identified separately. Other private creditors are mainly suppliers. Source: BoC-BoE Sovereign Default Database 2024

Defaults to private external creditors fell by 9%

Debt in default to private creditors dropped by US$29?billion, or 9%, to US$281?billion in 2023. As with official creditors, big variations were observed across categories. Defaults on foreign currency bonds, which made up the largest share of defaults, fell by US$24?billion, or 10%, as the completion of Puerto Rico’s US$61?billion debt workout offset ongoing defaults by 17?sovereigns. The most notable defaults by magnitude were Venezuela (US$50?billion), Russia (US$47?billion), Lebanon (US$40?billion), Ukraine (US$30?billion) Argentina (US$22?billion) and Ghana (US$13?billion). Defaults on bank loans rose US$5?billion due to defaults by 10?sovereigns, while defaults to other private external creditors (mainly suppliers) dropped by US$10?billion, or 24%, to US$32?billion.4

Local currency debt defaults also rose, albeit from a small base

Defaults on local currency sovereign debt jumped to nearly US$27?billion in 2023, up from US$16?billion in 2022, an increase of 65%. This is the highest level since 1999 and largely reflects the ongoing restructurings in Ghana and Sri Lanka. Argentina, Liberia and Suriname recorded smaller defaults.

The distribution of defaults remains concentrated

As in previous years, the distribution of defaults in 2023 is highly concentrated in terms of value: 10?sovereigns accounted for 75% of the US-dollar value of debt in default globally (Figure?1). Just three sovereigns—Venezuela, Russia and Iraq—accounted for 35% of the overall amount in default in 2023.

Figure 1: Global debt in default 1990–2023US$ millions

Allen Ehlert is a licensed mortgage agent specializing in real estate finance, financial strategy, underwriting, and investing. He provides independent consulting for companies and governments, including the Ontario Real Estate Association, Deloitte, the City of Toronto, Enbridge, and the Ministry of Finance.

Allen Ehlert is part of Mortgage Outlet. Mortgage Outlet is an independent boutique mortgage brokerage providing concierge financial services to its clients. Mortgage Outlet does over one billion dollars of mortgage underwriting each year. Mortgage Outlet agents are frequently relied on by the media (BNN, CP24, Financial Post, etc..) to provide on-camera professional insight.