Which Countries Have Most Recently Defaulted on Their Sovereign Debt Obligations?

-- Dominos falling one by one - Greece, Spain etc.- Bond Defaults --If you have been watching the news at all over the past few weeks, then you have likely heard about the situation in Greece.

Greece has become the center of a new chapter in the global financial crisis over the past few weeks, as a deeper-than-expected recession, "severe irregularities" in the nation's economic figures and a stifling national debt load have conspired to throw the future financial well-being of the Euro-member nation into doubt.

This story really started to kick into high gear shortly after the election victory of George Papandreou in October. Almost immediately after he declared victory, Prime Minister George Papandreou more than tripled the nation's deficit forecast for 2009 to 12.7% of GDP. This led many to question the ability of Greece to repay their sovereign debt obligations, which has raised the possibility that they would default on their obligations, barring some sort of a bailout from other European Union member nations, such as Germany and France.

Other member nations have declared "moral support" to Greece, but have not opened their checkbooks as of yet.

The worry isn't Greece itself really - the worry is that Greece would simply be the first domino to fall if they were to collapse. Other nations, such as Spain, Portugal and Ireland, are in similar situations.

This raises the question - which countries have most recently defaulted on their debt obligations?

There were some close calls during the economic meltdown of the past few years (countries such as Hungary, Latvia and Iceland needed to be saved by rescue packages, while Russia was perilously close to defaulting for the second time in less than 20 years), but as far as I am aware, the most recent Moody's rated sovereign bond default occurred in December of 2008.

Let's look at the list, starting in the summer of 1998:

Venezuela, July 1998 - defaulted on $270 million worth of domestic currency bonds

Russia, August 1998 - a massive $72,709,000,000 default that rattled the entire global economy. The trouble started in August of '98 when the country missed payments on local Treasury obligations, and later extended to include foreign currency obligations and MINFIN III foreign currency bonds. Russia's debts were eventually restructured in later years.

Ukraine, September 1998 - $1.27 billion dollar default

Pakistan, July 1999 - defaulted in July of 1999 but quickly resolved the situation

Ecuador, August 1999 - missed a payment, leading an an eventual restructuring of over 90% of their bonds. Default amount was around $6.6 billion

Ukraine, January 2000 - defaulted again (1.06 billion) in January of 2000. Defaulted on both DM-denominated Eurobonds and USD-denominated bonds. Ended up rectifying the situation by exchanging their current obligations for bonds with a longer term and lower coupon.

Peru, September 2000 - defaulted on $4.87 billion of debt but rectified the situation within 30 days

Argentina, November 2001 - a massive $82.26 billion dollar default that once again rattled the global economy and worldwide markets. Missed a payment in early 2002 - debt obligations were restructured and the country continued to receive funds from the IMF to aid in their recovery

Moldova, June 2002 - defaulted on $145 million worth of debt, only to rectify the situation a short while later, once to default once again

Uruguay, May 2003 - Argentina's troubles spread to Uruguay, and the government of Uruguay defaulted on $5.7 billion dollars worth of debt in May of 2003. The country eventually completed a restructuring of their debt obligations with their bondholders

Dominican Republic, April 2005 - Defaulted on $1.62 billion dollars worth of debt in April of 2005. Eventually completed a debt restructuring that ended up extending the maturity of their debt obligations by five years

Belize, December 2006 - Defaulted on $242 million dollars worth of debt in December of 2006

Ecuador, December 2008 - Defaulted on $3.2 billion dollars worth of debt obligations after calling several of their previous debt offerings "illegal and illegitimate". An unusual situation in that Ecuador is thought to have the resources NOT to default, but chose instead to default for "moral" reasons.

*note* there were other sovereign debt defaults that occurred during this period, including Ivory Coast, Grenada and Seychelles, but these countries did not have Moody's ratings on their sovereign bond obligations at the time

Source: Moody's - Sovereign Default and Recovery Rates, 1983-2008

Filed under: The Economic Meltdown

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