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Tracking sovereign stress in 45 emerging markets
The most-at-risk-country won't come as much of a surprise
The IMF Approves a New Use of SDRs! What’s Next?
Slovak premier Robert Fico shot and injured
Turkey’s World-Beating Lira Carry Trade Has Room for More Gains
South Africa’s ‘lost leader’ faces the end game
Who Is Claudia Sheinbaum, Mexico’s Likely Next President?
Chart Spotlight: Tracking sovereign stress in 45 emerging markets
Today’s charts are an update of the Sovereign Vibe sovereign debt stress tracker initially released in 2023. This tool is based directly on the IMF’s Debt Sustainability Framework for Market-Access Countries, released in 2021, and is relevant only for countries that “principally receive financing through market-based instruments and on non-concessional terms.” Through extensive testing, the IMF developed a model that measures the probability of a borrowing country experiencing sovereign debt strains in the near-term based on changes in nine macroeconomic and governance variables.
Results
Among middle- and lower-income countries with market access with full data availability across all indicators, Argentina, Angola, and Pakistan are most at risk of sovereign debt stress. In the heatmap below, brighter colors indicate more risk, while darker colors indicate less risk. I use percentile scoring for each variable, including the probability of sovereign stress outcome.

Argentina defaulted on local currency debt in 2023, which penalized the country via the “stress history” indicator and propelled it into the “top” spot. The sovereign defaults that I tallied based on S&P for 2023 are El Salvador, Cameroon, and Ethiopia on foreign currency debt and Argentina, Ghana, El Salvador, Mozambique, and Sri Lanka on local currency. Let me know if I am missing any!
Caveats
Regarding the other 2023 sovereign defaults, El Salvador registered as sixth-most at risk of sovereign stress. I would expect Sri Lanka to rank fairly high on the sovereign stress heat-map above. But data for Sri Lanka has been patchy since its 2022 default, preventing me from making a full calculation on the same footing as other countries.
The IMF does not consider Cameroon, Ethiopia, Ghana, and Mozambique to currently be MACs. Other countries are borderline. For instance, Angola has been a market-access country for several years, but it seems like the IMF is in the process of declassifying it due to current vulnerabilities. So I may remove Angola from the next update. On the other hand, Nigeria still seems to be within the IMF’s MAC perimeter.
Also, this tracker shouldn’t be taken as gospel as to the likelihood of sovereign stress, as it only reflects macroeconomic-related indicators and which are mostly backward-looking. It fails to capture the qualitative aspects of a government’s commitment to reforms. Case in point: I wrote of Egypt’s brightening prospects last week.
Changes since October 2023
The table below outlines changes in the ten MACs most at-risk of experiencing sovereign debt strains. Argentina, Nigeria, and Ukraine have deteriorated by climbing up the ranking. Angola, Pakistan, Egypt, Jordan, Ecuador, Belize, and Mexico have seen their rankings improve. El Salvador continues to occupy the sixth spot.
Rank | May 2024 | October 2023 |
---|---|---|
🥇 | 🇦🇷 Argentina ⬆️ | 🇦🇴 Angola |
🥈 | 🇦🇴 Angola ⬇️ | 🇵🇰 Pakistan |
🥉 | 🇵🇰 Pakistan ⬇️ | 🇪🇬 Egypt |
4 | 🇪🇬 Egypt ⬇️ | 🇯🇴 Jordan |
5 | 🇳🇬 Nigeria ⬆️ | 🇦🇷 Argentina |
6 | 🇸🇻 El Salvador | 🇸🇻 El Salvador |
7 | 🇺🇦 Ukraine ⬆️ | 🇪🇨 Ecuador |
8 | 🇯🇴 Jordan ⬇️ | 🇧🇿 Belize |
9 | 🇪🇨 Ecuador ⬇️ | 🇩🇴 Dominican Republic |
10 | 🇧🇿 Belize ⬇️ | 🇲🇽 Mexico |
I was surprised to see Mexico in October’s top ten, which points to some of this tool’s analytical limits. I and many others have generally perceived Mexico as a positive EM story in recent years, with an economy benefiting from supply chain reconfigurations and near-shoring, and an appreciating peso. Nevertheless, this IMF model can help challenge consensus narratives: in fact, Mexico is penalized precisely because of the strong appreciation of its real effective exchange rate over the past three years.
Headline Roundup
Sovereign Debt
IMF & SDRs:
New York: Sovereign Debt Legislation in the State of New York: How a Compromise Might Look Like
EM bonds:
Angola: Angola agrees deal with Chinese state bank to ease debt crunch
Jordan: First in 21 years: Jordan’s credit rating upgraded to Ba3
Climate:
Debt, Climate and the Pressing Need for Collaboration: Insights from the 2024 IMF/World Bank Group Spring Meetings
Preventing a Default on Development and Climate: How Debt Relief Can Support Development Efforts for over 1 Billion People
ECB: High debt levels put Europe at risk of ‘adverse shocks’, ECB warns
United States: Bridgewater founder Ray Dalio warns of danger of US debt to Treasury market
Emerging markets & developing economies
Slovakia: Slovak premier Robert Fico shot and injured
Turkey: Turkey’s World-Beating Lira Carry Trade Has Room for More Gains
Kenya: Kenya’s 15% Infrastructure Bond Tax May Dent Foreign Demand
South Sudan: South Sudan on Edge as Its Neighbour’s War Disrupts Oil Exports
Gabon: Panoro Energy discovers 20 million-barrel oil well
Development:
Deglobalization
Oil: The axis of evasion: Behind China’s oil trade with Iran and Russia
United States:
US sharply raises tariffs on Chinese EVs and semiconductor imports
US set to impose 100% tariff on Chinese electric vehicle imports
America is pulling up the drawbridge
China: China’s Factory Glut Alarms the World But There’s No Quick Fix
Russia: Russian court seizes assets worth €463mn from Italy’s UniCredit
Europe: Can Europe’s economy ever hope to rival the US again?
De-dollarization
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