Last updated: August 2023
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. The database draws on published datasets compiled by various public and private sector sources. It combines elements of these 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 2022, on both a country-by-country and a global basis.
The database is posted on the BoC’s website and is updated annually in partnership with the Bank of England (BoE). Regular updates of the BoC–BoE database are useful to researchers analyzing the economic and financial effects of individual sovereign defaults and, importantly, the impacts on global financial stability from episodes involving multiple sovereign defaults.
In this paper, we:
- highlight developments in sovereign debt defaults in 2022, including high-level details on the 34% increase from 2021 in the US-dollar value of sovereign debt in default
- update key insights regarding the number, size and types of defaults
- give a historical overview of debt defaults and their persistence in highly indebted, low-income sovereigns
- examine the shift in bilateral official sovereign lending from Paris Club lenders toward China1
- update our estimates of stocks of domestic arrears
The 2023 edition of the database and related research contain a number of enhancements, including:
- more data for defaults on China’s official loans since 2000
- minor revisions to country and aggregate default data for 1960 to 2021
- new data on domestic arrears by country and globally, most comprehensively for the years 1995 to 2022
- a new section about the characteristics of sovereign defaults
- new visuals showing regional debt in default
- a revised standalone methodology document, alongside a new, separate document with the appendix and references
- improvements to the functionality of the database
Key insights from the 2023 edition
The total value of sovereign debt in default increased 34% last year
We estimate the total value of sovereign debt in default at US$554 billion in 2022, or 0.6% of public debt worldwide. This is an increase of US$140.6 billion, or 34%, from the revised total of US$413.6 billion in 2021. The increase occurred even though the number of sovereigns in default declined from 99 to 83. This was driven, in part, by the tighter financing conditions impacting many Heavily Indebted Poor Countries (HIPCs) and emerging/frontier market sovereigns. Debt in default jumped 52% for HIPCs and 47% for emerging/frontier market sovereigns, but by just 2% for advanced-economy sovereigns.
Defaults to official external creditors rose by 16% in 2022
Loans in default to official creditors increased by US$31.2 billion, or 16%, between 2021 and 2022, but the major sub-groups of creditors each fared differently. Defaults to identified multilateral creditors, such as the International Monetary Fund (IMF), the World Bank and the Inter-American Development Bank, declined by US$1.9 billion. Among bilateral creditors, defaults to the Paris Club rose by nearly US$21 billion, while identified defaults to China rose by US$3.1 billion. Defaults to other official creditors (bilateral and multilateral creditors we have not identified separately) rose by US$9.1 billion.
Defaults to private external creditors jumped by 43%
Debt in default to private creditors jumped more sharply, by US$109.2 billion in 2022 compared with 2021. As with official creditors, big variations were observed across categories. Defaults on foreign currency bonds, which made up the largest share of all defaults (Chart 1), rose by US$119.2 billion, reflecting first-time defaults by Belarus, Ghana and Sri Lanka. Ukraine also defaulted on its foreign currency bonds for the first time since 2016. By contrast, defaults on bank loans and to other foreign creditors (mainly suppliers) dropped by US$1 billion and US$22.2 billion, respectively.
Local currency debt defaults also rose, albeit from a small base
Defaults on local currency sovereign debt increased significantly to US$13.7 billion from US$275 million in 2021. This largely reflected a US$13.5 billion default by Ghana, its first since 1982. Argentina, Barbados and Peru registered smaller defaults.
General government debt remains elevated as interest rates rise globally
The IMF estimates that the global stock of general government debt, measured in US dollars, reached a record US$92.3 trillion in 2022, or 92% of global gross domestic product. The IMF also projects that the global public debt burden will continue to grow over the medium-term. Against a backdrop of historically high inflation and rising nominal and real interest rates, debt service payments remain challenging for many emerging-market and developing economies. The World Bank (2022) estimates that the poorest countries (those deemed eligible to borrow from the World Bank’s International Development Association) already spend over one-tenth of their export revenues to service their long-term, external public debt.
- 1. The Paris club members are an informal group of mostly advanced-economy countries. The permanent members are Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, Russia, South Korea, Spain, Sweden, Switzerland, the United Kingdom and the United States. For more information, see the Paris Club website.[←]