According to Visual Capitalist, Ghana is now second on the list of countries with the highest default risk in 2022. Only four countries – Ukraine 10,856 basis points (bps), Argentina (4,470), El Salvador (3,376), and Ethiopia (3,035) – have credit default swap spreads of 2,071 bps, which is higher than Ghana’s.
El Salvador has the highest default risk
Ghana, West Africa’s second-largest economy, whose inflation rate jumped over 29% in June, ranks among the countries most likely to default this year, Visual Capitalist’s latestsovereign debt vulnerability rankingreveals. According to the data, Ghana currently ranks second among Central American nations, behind only El Salvador, the first country to make bitcoin legal tender.
Data from Visual Capitalist, an online publication focused on technology, the global economy, and more, shows that Ghana’s 5-year credit default swap (CDSS) spreads are among the highest in the world at 2071 basis points (bps). Only four countries have credit default swap (CDSS) spreads higher than Ghana’s. Ukraine (10,856 bps), Argentina (4,470 bps), El Salvador (3,376 bps), and Ethiopia (3,035 bps).
According to Investopedia’s description, a CDS is “a derivative financial instrument that allows an investor to swap or offset the credit risk of another investor.”
Interest Expense Ratio
Another indicator of the likelihood of default in Ghana is the country’s interest expense as a percentage of gross domestic product (GDP) According to Visual Capitalist data, Ghana’s interest expense ratio is 7.6%. 2%, the second highest in the world after Egypt (8.2%).
Combining these indicators with the country’s debt to GDP ratio of 84.6% and government bond yield of 17.1%, Ghana, which finally agreed to seek International Monetary Fund (IMF) support, seems destined to follow in the footsteps of Sri Lanka, which defaulted on its debt in May.
Meanwhile, according to Visual Capitalist rankings, Tunisia is the African country with the next highest risk of default in 2022, followed by Egypt. Globally, Tunisia ranks third, while Egypt and Kenya rank fifth and sixth, respectively. Completing the top 10 countries with the highest default is Namibia.
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