Fitch warns of rising sovereign defaults

Following a record number of sovereign defaults in 2020, Fitch Ratings believes more are possible going forward.

The sovereign issuer-based default rate rose to a record high in 2020 against a backdrop of weakened sovereign credit profiles due to the Covid-19 pandemic.

A recent Sovereign 2020 Transition and Default Study’ by Fitch Ratings showed that five Fitch-rated sovereigns defaulted in 2020 Argentina twice, Ecuador, Lebanon, Suriname twice and Zambia up from only one in the previous year.

As a result, the sovereign default rate rose more than threefold to 4.2% from 0.9% in 2019. The previous high was 1.8% in both 2016 and 2017.

While downgrade pressures have eased this year, Fitch said its ratings indicate that more

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