In today’s world, several countries are struggling with serious financial problems. Seven countries, in particular, are facing bankruptcy as their economic conditions have worsened. These nations are dealing with high debt, low economic growth, and rising inflation, which are putting a strain on their ability to manage finances. This situation is affecting not only their governments but also the lives of their citizens, leading to increased poverty and uncertainty about the future.
Seven Countries Facing Bankruptcy or Seeking Bailouts
Pakistan: Pakistan’s economy is struggling despite a recent bailout from the International Monetary Fund (IMF) worth $7 billion. This bailout came after a previous $3 billion loan that helped the country avoid bankruptcy in 2023. However, over 60% of Pakistan’s tax revenue is now needed to pay off old debts. The IMF estimates that Pakistan will require at least $123 billion in additional financial support by 2029. Although the country’s foreign currency reserves have recently surpassed $10 billion, this amount is still not enough to cover even three months’ worth of imports. The situation is made worse by ongoing political instability and high inflation, which was recorded at 9.6% in August 2024.
Sri Lanka: Sri Lanka defaulted on its $83 billion debt in April 2022, but things are starting to improve. The country’s foreign exchange reserves have increased to $5.95 billion, the highest in three years. Additionally, inflation has dropped dramatically from 67% in September 2022 to just 1.1% in August 2024. After its GDP fell from around $94 billion in 2017 to $84.4 billion in 2023, it has begun to grow again in early 2024. However, rising poverty levels and outstanding debt payments could hinder this recovery. Recently, Sri Lanka reached an agreement with its creditors to restructure $12.5 billion in debt, where lenders agreed to take a 27% loss on their loans.
Bangladesh: Bangladesh is facing significant financial troubles with a total debt of $156 billion, which is five times more than it was in 2008. Global rating agencies have labeled its credit as “junk,” and the country’s credit rating was downgraded even before a recent political crisis. As a result, Bangladesh’s foreign currency reserves have dropped from $32 billion in January 2023 to $20 billion in September 2024. Although the central bank has tried to help by devaluing the Taka (the local currency), inflation is expected to rise to 10.1% in the upcoming fiscal year due to high food prices. While there isn’t a debt crisis yet, the worsening economic situation requires urgent attention. The IMF has approved a $4.7 billion lifeline for Bangladesh, to be disbursed over three and a half years, ending in 2026.
Venezuela: Venezuela’s debt stands at $154 billion, and the country has been in default since 2017. Its economy has shrunk dramatically, with GDP falling from $372.59 billion in 2012 to just $102.33 billion in 2024. Once one of Latin America’s wealthiest nations, Venezuela is now facing severe economic difficulties under an authoritarian government. Despite experiencing a 5% economic growth last year, 82% of its population lives in poverty. While inflation rates have decreased, they are still high, with a 25% increase compared to last year. The government is currently in talks to restructure its debt, but political turmoil is complicating these efforts.
Argentina: Argentina has defaulted on its national debt three times in the 21st century and owes over $400 billion to creditors. The country has had several debt restructurings, the most recent occurring in 2023. Under President Javier Milei, the government has made reforms that have brought down annual inflation from a staggering 300% to 236%. However, this rate is still extremely high. Poverty levels have soared, exceeding 52.9%. Due to the uncertain economic conditions, experts believe there is a 75% chance that Argentina will default again between 2025 and 2027.
Zambia: Zambia defaulted on its Eurobond debt in 2020, becoming the first country to restructure its $6.3 billion in external debt this year. Despite this progress, Zambia still faces significant financial challenges. By 2023, its external debt arrears reached 26% of its GDP, which the IMF has deemed unsustainable. The country is also struggling to restructure at least $3.3 billion in commercial loans. If these loans are not managed properly, Zambia risks falling into another default.
Ghana: Ghana’s total debt has reached $44 billion, making up 70.6% of its GDP. In December 2022, Ghana defaulted on most of its external debts, which led to an economic crisis characterized by rising debt costs and inflation. The country’s foreign currency reserves fell from $9.7 billion in 2021 to $5.9 billion by 2023. However, Ghana’s economy is now showing signs of recovery, with a GDP growth rate of around 5.8% for the first half of 2024. Inflation has also dropped to its lowest level since 2022. The IMF has credited its $3 billion support package, approved in May 2023, with helping the economy. Recently, Ghana reached a $13 billion debt restructuring agreement with its creditors, where lenders agreed to forgive 40% of the debt.
These countries highlight the complex challenges facing nations grappling with financial instability, high debts, and economic reforms.
