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List of countries with highest default risk 2022

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The South Asian nation Sri Lanka defaulted in May 2022 for the first time on its debt. Its government was given an ultimatum of 30 days to cover $78 million in unpaid interest, however, it failed to do so. 

This raises an important question: Which other countries are at risk of default in 2022?

According to Visual Capitalist via Bloomberg, here are countries with a higher risk of default this year. Pakistan is also included in the list.

List of countries with highest default risk 2022

The Sovereign Debt Vulnerability Ranking — a composite measure of a country’s default risk — by Bloomberg is based on four metrics; government bond yields (the weighted-average yield of the country’s dollar bonds), five-year credit default swap (CDS) spread, interest expense as a percentage of gross domestic product (GDP), and government debt as a percentage of GDP.

In order to have a better understanding, let’s take a look at Ukraine and El Salvador. 

List of countries with highest default risk 2022

Ukraine’s Bond Yields

Due to the ongoing conflict between Ukraine and Russia, the former has a higher risk of default. If Russia takes control of the country, Ukraine might not be able to repay its existing debt obligations.

This has caused a sell-off of Ukrainian government bonds, resulting in a decrease in their value to 30 cents on the dollar. This means that a bond could be purchased for $30, having a face value of $100.

The average yield on these bonds has increased to 60.4% as it moves in the opposite direction of the price. “As a point of comparison, the yield on a US 10-year government bond is currently 2.9%,” according to Visual Capitalist.

CDS Spread

In the case of a default, a lender can get insurance with the help of credit default swaps (CDS), which are a type of financial contract. 

A CDS seller represents a third party between the lender (investors) and borrower (in this case, governments).

The buyer pays a fee, which is also known as spread in return. It is expressed in basis points (bps). The investor has to pay $3 per year if a CDS has a spread of 300 bps (3%) to insure $100 in debt.

If this is applied to Ukraine’s five-year CDS spread of 10,856 bps (108.56%), the investor would have to pay $108.56 yearly to insure $100 in debt, suggesting the market’s less faith in Ukraine to prevent itself from being defaulted. 

El Salvador’s higher ranking

As compared to Ukraine, El Salvador has a higher ranking due to its “larger interest expense and total government debt.”

The data shows that El Salvador’s annual interest payments are equal to 4.9% of its GDP, making it higher. Meanwhile, the US has a federal interest cost of about 1.6% of GDP in 2020.

El Salvador has outstanding debts of about 82.6% of GDP when totalled which is high by historical standards.

“The next date to watch will be January 2023, as this is when the country’s $800 million sovereign bond reaches maturity,” per the Visual Capitalist

Research says that El Salvador would face significant but temporary negative effects if it defaults. 

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Barrick CEO: Reko Diq mine will provide $74 billion in free cash flow over 37 years.

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Based on consensus long-term prices, the Reko Diq copper and gold project in Pakistan is anticipated to produce almost $74 billion in free cash flow over the next 37 years, according to the CEO of joint owner Barrick Gold, who made this statement in a media interview.

Half of the Reko Diq mine is owned by Barrick Gold, with the remaining 50% being owned by the province of Balochistan and the Pakistani government.

The development of the mine is anticipated to have a major impact on Pakistan’s faltering economy, and Barrick views it as one of the greatest untapped copper-gold zones in the world.

A protracted conflict that ended in 2022 caused the project to be delayed, although it is anticipated that production will begin by the end of 2028. In its initial phase, it will cost an estimated $5.5 billion and generate 200,000 tons of copper annually.

In an interview with the media, Barrick CEO Mark Bristow stated that the first phase should be finished by 2029.

He said that production will increase in a second phase, which is expected to cost $3.5 billion.

Although the mine’s reserves are estimated to last 37 years, Bristow stated that with improvements and additions, the mine’s useful life may be significantly extended.

Pakistan, which now has just about $11 billion in foreign reserves, could receive substantial dividends, royalties, and taxes from a free cash flow of $74 billion.

Additionally, Barrick is negotiating with infrastructure providers and railway authorities to renovate the coal terminal in Port Qasim, which is located outside of Karachi, Pakistan, in order to provide infrastructure for the domestic and international transportation of copper.

The project is on schedule, according to Bristow, with surveys, fencing, and lodging already finished.

In the next two quarters, the Saudi mining corporation Manara Minerals may make an investment in Pakistan’s Reko Diq mine, Pakistani Petroleum Minister Musadik Malik stated last week.

Manara executives traveled to Pakistan in May of last year to discuss purchasing a share in the project. Additionally, Pakistan is discussing mining prospects with other Gulf nations, according to Malik.

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According to projections made by the World Bank, Pakistan’s gross domestic product will expand by 2.8% during the fiscal year 2024-25.

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A significant gain of 0.5% from its previous estimate of 2.3% in June 2024, the World Bank has updated its forecast for the growth of Pakistan’s gross domestic product for the fiscal year 2024-25 to 2.8%.

The International Monetary Fund (IMF) has projected a growth rate of 3%, and our prediction falls short of that projection. Additionally, the government’s goal growth rate of 3.6% is lower than this prediction.

Pakistan’s growth is still relatively slow in comparison to that of its neighbors in the region, as stated in the World Bank’s World Economic Prospects Report 2025.

With a growth rate of 6.7%, India is anticipated to top the South Asian region. Bhutan, with a growth rate of 7.2%, Maldives, with a growth rate of 4.7%, Nepal, with a growth rate of 5.1%, Bangladesh, with a growth rate of 4.1%, and Sri Lanka, with a growth rate of 3.5% should follow.

The findings of the analysis reveal that although Pakistan’s economy is showing signs of minor improvement, it is still confronted with substantial obstacles. The nation’s foreign exchange reserves have been strengthened as a result of the fact that inflation, which had reached double digits in previous years, has now fallen to single digits for the first time since 2021.

Following the elections that took place in February 2024, the administration has implemented stringent fiscal and monetary policies, which have contributed to a reduction in uncertainty. This improvement can be linked to these policies.

It is anticipated that Pakistan’s per capita income will continue to be low until the year 2026, according to the World Bank, despite the fact that some favorable improvements have occurred. Not only does this reflect broader regional patterns, but it also underscores the fact that Bangladesh and Sri Lanka are also facing comparable issues.

The rising weight of debt was another topic that was brought up in the report. It is anticipated that interest payments will increase in both Pakistan and Bangladesh.

The ratio of Pakistan’s debt to its gross domestic product is expected to steadily decrease, assuming that the government continues to uphold its commitment to the existing loan arrangement with the International Monetary Fund. A warning was issued by the World Bank, stating that any deviation from the program might have a significant impact on the economic operations of the country. The World Bank emphasized the significance of complying to the requirements of the International Monetary Fund (IMF).

Despite the fact that the country’s inflation rate has been moderated and its reserves have been strengthened, experts have pointed out that the implementation of structural reforms and the management of external debt are the most important factors in determining the country’s long-term economic stability.

According to a report published by the World Bank, Pakistan needs to provide consistent policies and a stable macroeconomic environment in order to maintain investor confidence.

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SIFC and UNICEF Collaborate on Youth Training: $1.5 Million Girls’ Education Agreement

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A deal between UNICEF and the Muslim World League has been signed to start the “Green Skills Training Program,” which would equip young people with digital and sustainable development skills.
With the help of the Special Investment Facilitation Council, the program will provide educational and employment opportunities to economically disadvantaged youth, particularly girls.
One and a half million dollars have been committed by the Muslim World League to support Pakistani girls’ education and training. The program’s goal is to give young people the tools they need to have a sustainable future.
This program is a component of a 14-year partnership between UNICEF and the Muslim World League, which has aimed to enhance the lives of children in numerous nations. The program will improve vocational training and provide Pakistani youth with economic opportunities through SIFC’s assistance.

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