Greece Tops the List of Sovereign Debt Defaulters

Greece, with a debt of $264.2 billion in November 2012, has been credited with the dubious distinction of becoming the largest sovereign debt defaulter among top 10 such nations since 1983. Greece was mired in recession for fifth consecutive year at that time.

Greece also defaulted in making payment of $41.4 billion for the second time in December the same year. On the other hand, Argentina defaulted thrice during the above mentioned period – $82.3 billion in November 2001, $29.4 billion in July 2014, and again in 2020 when it could not repay $10.5 billion, according to data from Moody’s, which is the bond credit rating business of Moody’s Corporation.

The LATAM nation also defaulted for the fourth time in 2023, according to a report in Visual Capitalist, one of the fastest growing online publishers globally, focused on topics including markets, technology, energy and the global economy.

Leading up to the economic crash, Greece ran significant deficits despite being one of the fastest-growing countries in Europe. Furthermore, in 2009, the leadership of Greece said that the country was $410 billion in debt—substantially more than previous estimates.

Like Greece, Argentina is a repeat offender, defaulting numerous times since independence in 1816. Today, Argentina is the largest debtor to the International Monetary Fund, despite being Latin America’s third-largest economy.

The other countries which figure in the list of top 10 were Russia ($72.7 billion in August 1998), Lebanon ($31.3 billion in March 2020), Venezuela ($31.1 billion in November 2017), Ecuador (17.3 billion in April 2020) and Ukraine ($13.3 billion in October 2015) after Russia invaded Crimea in 2015 respectively.

Five Defaulters in 2023

There were five sovereign debt defaulters – El Salvador, Sri Lanka, Mozambique, Ethiopia, Argentina – in 2023, and local currency defaults outnumbered foreign currency defaults during the year. In July this year, Ukraine avoided defaulting on $20 billion in loans by reaching a preliminary agreement with private creditors.

According to Aswath Damodaran, Professor of Finance at the Stern School of Business at New York University, the most observable measure of country risk, at least in financial markets, is the default risk when lending to the government of that country. This risk, termed sovereign default risk, has a long history of measurement attempts, stretching back to the 19th century.

Given the financial burden of Ukraine’s war with Russia, the country suspended interest payments on international debt over the last two years, which expired on 1 August 2024. Without this new debt restructuring, this default would have ranked among the 10 largest in recent history.

Russia’s default coincided with a currency crisis that erased more than two-thirds of the ruble’s value in a matter of weeks in 1998. In the same year, several other countries including Venezuela, Pakistan, and Ukraine defaulted on their debts after the Asian Financial Crisis of 1997 spurred instability in global financial markets.

Just as 1998 saw a wave of defaults, 2020 was a year marked by major debt upheavals. Due to the pandemic and collapsing oil prices, it was a record year for sovereign defaults, reaching seven in total. Among these, Lebanon, Ecuador, and Argentina saw the largest defaults amid deepening fiscal pressures.