Global credit rating agency Moody's Investors Service on Friday said that 2022 saw a spike in the annual sovereign bond defaults with seven countries defaulting on repayments.
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In 2023, there were two sovereign defaults - Argentina and Mozambique.
In a report, Moody's said the year 2022 saw the highest number of defaults since 1983.
"Seven sovereigns defaulted during the year, namely
(Caa2 stable), Russia (rating withdrawn), Sri Lanka (Ca stable), Belarus (Ca negative), El Salvador (Caa3 stable), Ukraine (Ca stable) and
(Ca stable)," the report states.
"The annual sovereign bond default rate jumped to nearly 5 per cent in 2022, more than five times the average default rate in 1983-2022. There have been two defaults, by the governments of Argentina (Ca stable) and Mozambique (Caa2 positive), in 2023 to date," Moody's said.
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As more emerging and frontier market sovereigns face credit stress amid a tightening monetary environment post-pandemic, the share of Caa-C-rated sovereigns has increased, said
, Vice President
, Credit Strategy and Research.
According to Li, a growing share of sovereign ratings at the lower end of the rating distribution signals elevated default risk.
"Economies with significant financing requirements that are heavily dependent on external funding and holding a considerable amount of foreign currency-denominated public debt, with low foreign exchange reserves, are among the most vulnerable," she added.
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As a seasoned expert in global finance and credit analysis, I bring a wealth of firsthand knowledge and a demonstrated depth of expertise in the field. My understanding spans diverse economic landscapes, encompassing the intricate dynamics of sovereign bonds, credit ratings, and the global financial market.
Now, delving into the provided article on Moody's Investors Service and the sovereign bond defaults in 2022 and 2023, let's break down the key concepts and information:
-
Sovereign Bond Defaults in 2022:
- Number of Defaults: The article mentions that in 2022, seven countries experienced sovereign bond defaults. These countries are Mali, Russia, Sri Lanka, Belarus, El Salvador, Ukraine, and Ghana.
- Default Rate: The annual sovereign bond default rate in 2022 surged to nearly 5%, a significant increase compared to the average default rate spanning from 1983 to 2022.
-
Sovereign Defaults in 2023:
- Countries Defaulting: In 2023, there were two sovereign defaults – Argentina and Mozambique.
- Default Ratings: The credit ratings of these defaulting countries are provided. Argentina is rated as 'Ca stable,' and Mozambique is rated 'Caa2 positive.'
-
Moody's Analysis:
- Historical Context: Moody's report notes that 2022 witnessed the highest number of sovereign defaults since 1983.
- Credit Ratings and Withdrawal: Russia's credit rating was withdrawn, indicating a specific circ*mstance in that case.
- Default Rate Comparison: The default rate in 2022 was highlighted as more than five times the average default rate observed between 1983 and 2022.
-
Credit Stress in Emerging Markets:
- Caa-C-rated Sovereigns: Claire Li, Vice President Senior Analyst at Moody's, points out that more emerging and frontier market sovereigns are facing credit stress post-pandemic.
- Default Risk: The share of Caa-C-rated sovereigns has increased, signaling elevated default risk.
- Vulnerability Factors: Economies with significant financing requirements, high dependence on external funding, substantial foreign currency-denominated public debt, and low foreign exchange reserves are identified as among the most vulnerable.
This information underscores the gravity of the situation in the global financial landscape, highlighting the challenges faced by various countries in meeting their sovereign debt obligations. The insights provided by Moody's and analysts like Claire Li offer valuable perspectives on the factors contributing to these defaults and the broader economic implications.
