10 developing nations in debt crisis, most defaulting due to inflation

Thursday April 06 2023
debt burden

Several developing countries face debt distress and some have opted to default on their loans. PHOTO | SHUTTERSTOCK


The record number of developing nations at risk of a debt crisis will be high on the agenda next week when central bankers, finance ministers and political leaders convene for the World Bank Group and International Monetary Fund (IMF) spring meetings.

Ballooning inflation, escalating borrowing costs and a strong dollar have made repaying loans as well as raising money significantly more expensive for dozens of developing nations pushing several into default last year.

Below is a look at countries that face a debt crunch or have already defaulted on international loans.


Egypt's tourism-dependent economy was hammered by the one-two punch of Covid-19 and soaring food as well as energy prices, leaving it short of dollars and struggling to pay rising debts.

Pyramid of Giza in Egypt

Tourists visit the Great Giza Pyramids on the southwestern outskirts of Cairo, Egypt. PHOTO | KHALED DESOUKI | AFP)


Cairo secured a new $3 billion IMF package in December by committing to a flexible currency, a greater role for the private sector as well as a range of monetary and fiscal reforms.

Import and currency restrictions have weighed on economic activity and a foreign currency shortage continues despite three sizable devaluations since March 2022 that halved the value of the pound. Inflation stands now at a more than five-year high above 30 percent.

Read: Egyptians cling to Ramadan charity as inflation soars

El Salvador

El Salvador cleared a $600 million bond payment hurdle in January. The Central American country has roughly $6.4 billion in outstanding Eurobonds. While the next payment is not due until 2025, concerns about El Salvador's high debt service costs and its financing plans and fiscal policies have pressed its bonds into deeply distressed territory.

The country's move to make bitcoin legal tender in September 2021 effectively closed the doors to IMF financing. However, the IMF acknowledged risks over El Salvador's embrace of bitcoin have not materialized.


Ghana is in its worst economic crisis in a generation, spending over 40 percent of government revenues on debt payments last year. In January, it became the fourth country to seek a rework under the Common Framework.

The West African country secured a $3 billion agreement with the IMF in December, though it still needs to get financing assurances from bilateral lenders to clinch the final sign-off. The cocoa, gold and oil producer has already reached a deal to write down domestic debt and last week kicked off formal debt talks with international bondholders.

ghana cocoa

A cocoa fruit in Ghana. PHOTO | NMG

Read: Ghana bags aid package as Harris tours Africa


Lebanon's financial system began unravelling in 2019 after decades of mismanagement and corruption and in early 2020, it defaulted. Lebanon has had neither a head of state nor a fully empowered cabinet since October 31 last year.

It reached a provisional $3 billion IMF agreement in April 2022, but the fund recently warned Lebanon was in a ‘very dangerous situation’ due to delays on a range of reforms, including banking and exchange rate overhauls. Beirut devalued the official exchange rate for the first time in 25 years in February. Last month its central bank said it would begin selling unlimited amounts of US dollars to halt spiralling devaluation.


Malawi is grappling with foreign exchange shortages and a budget deficit of some 1.32 trillion kwachas ($1.30 billion), or 8.7 percent of GDP.

The donor-dependent Southern African nation is trying to restructure its debt in order to secure more funding from the IMF, which approved emergency funds in November.


Months of political and economic turmoil, worsened by crippling floods last year and record inflation put Pakistan in the danger zone.

China agreed to refinance $1.8 billion already credited to Pakistan's Central Bank and last month rolled over a $2 billion loan that had matured earlier in March, providing relief during Pakistan's acute balance of payments crisis.

But talks with the IMF for a delayed $1.1 billion loan tranche, part of $6.5 billion bailout agreed in 2019 have dragged on and foreign exchange reserves have fallen to less than four weeks of imports.

Read: Pakistan ex-president Musharraf buried


The tourism-dependant North African economy is in the throes of a punishing crisis that led to a shortage of basic food items.

A $1.9 billion IMF loan has been stalled for months as Tunisia's president has shown little sign of action on key reforms. Most debt is internal but foreign loan repayments are due later this year. Credit ratings agencies have said Tunisia may default.

Tunisia President

Tunisia's President Kais Saied. PHOTO | FETHI BELAID | AFP

Sri Lanka

Sri Lanka defaulted on its international debt last year after economic mismanagement, exacerbated by the Covid-19 pandemic, sparked a political crisis and left it without dollars for even essential imports.

The IMF signing a $3 billion bailout package last month could help the South Asian island country secure additional support of nearly $4 billion from the World Bank, Asian Development Bank and other lenders.

The country’s government officials aim to complete debt restructuring talks by September. Sri Lanka is also reworking part of its domestic debt and aims to finalise it by May.


Ukraine just received the first $2.7 billion tranche under a four-year, $15.6 billion IMF loan program. This is part of a bigger $115 billion global package of support.

The country suspended all debt payments last year in the wake of Russia's invasion and will need to restructure its borrowings if and when the situation stabilises.

Read: Deadly Russian strikes pound Ukraine

The IMF estimates Ukraine needs $3-$4 billion a month to keep the country running. Rebuilding Ukraine's economy is now expected to cost $411 billion, a recent report by the World Bank and others found.


The first African country to default during the Covid-19 era in 2020, Zambia is seen as a litmus test for the G20's Common Framework initiative set up during the pandemic to streamline debt restructurings. But talks have been remarkably slow and external debt crept up to $18.6 billion.

Western officials have blamed China (its largest bilateral lender) for the hold-up, something that China disputes. There have been broad disagreements about how much debt the country can afford going forward.

Zambia's currency the kwacha has fallen more than 10 percent against the US dollar this year, which the country’s central bank has said is adding to inflation. It blamed the drop partly on debt restructuring delays.