Ghana Ranked as Country With Second-Highest Debt Default Risk Globally
According to Visual Capitalist, Ghana is now placed second on its list of countries with the highest default risk in 2022. Only four countries, namely, Ukraine 10,856 basis points (bps), Argentina (4,470), El Salvador (3,376), and Ethiopia (3,035) have a credit default swap spread that is higher than Ghana’s at 2,071 bps. El Salvador Has Highest Default Risk
After seeing inflation surge to over 29% in June, Ghana, West Africa’s second-largest economy, is now ranked as one of the countries most likely to default this year, Visual Capitalist’s latest sovereign debt vulnerability rankings have shown. According to the data, Ghana is now placed second, just behind the Central American state and the first country to make bitcoin legal tender, El Salvador. Source: Visual Capitalist.
As shown by data from Visual Capitalist — an online publisher focused on technology and the global economy, among others — Ghana’s five-year credit default swap spread (CDSS) of 2,071 basis points (bps) is one of the highest globally. Only four countries have a credit default swap spread that is higher than that of Ghana: Ukraine (10,856 bps), Argentina (4,470 bps), El Salvador (3,376 bps), and Ethiopia (3,035 bps).
As explained by Investopedia, CDS is “a financial derivative that allows an investor to swap or offset their credit risk with that of another investor.”
Interest Expense Ratio
Another metric pointing to Ghana’s likely default is the country’s interest expense as a percentage of the gross domestic product (GDP). According to Visual Capitalist data, with a share of 7.2%, Ghana’s interest expense ratio is the second-highest in the world behind only that of Egypt (8.2%).
When these metrics are combined with the country’s debt as a percentage of the GDP of 84.6%, and a government bond yield of 17.1%, Ghana, which finally agreed to seek the International Monetary Fund (IMF)’s help, looks destined to follow in the footsteps of Sri Lanka, which defaulted on its obligations in May.
Meanwhile, according to the Visual Capitalist rankings, Tunisia is the African country with the next highest default risk in 2022 and is followed by Egypt. Globally, Tunisia is ranked third while Egypt and Kenya are ranked fifth and sixth, respectively. Completing the top ten countries with the highest default is Namibia.
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Tags in this story bitcoin legal tender el salvador, CDSS, credit default swap spread, financial derivative, gdp, Ghana default, government bond yield, IMF, inflation rate, interest expense, sovereign debt
What are your thoughts on this story? Let us know what you think in the comments section below. Terence Zimwara
Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route. Analysts Suspect the Fed Will Bump Federal Funds Rate by 75 bps Next Week, Others Predict the "Biggest Hike in Decades’ ECONOMICS | 16 hours ago Report: Bank of Spain Worried About Inflation and Its Consequences in Latam ECONOMICS | 3 days ago
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