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 $78 million in unpaid interest, but ultimately failed to pay.
Not only does this impact Sri Lanka’s economic future, but as Visual Capitalist’s Marcus Lu notes, it also raises an important question: which other countries are at risk of default?
To find out, we’ve used data from Bloomberg to rank the countries with the highest default risk.
The Sovereign Debt Vulnerability Ranking
Bloomberg’s Sovereign Debt Vulnerability Ranking is a composite measure of a country’s default risk. It’s based on four underlying metrics:
Government bond yields (the weighted-average yield of the country’s dollar bonds)
5-year credit default swap (CDS) spread
Interest expense as a percentage of GDP
Government debt as a percentage of GDP
To better understand this ranking, let’s focus on Ukraine and El Salvador as examples.