Argentina, Belize, Ecuador, Lebanon, Suriname and Zambia defaulted on their bond payments in 2020, making it a record year for sovereign bond defaults.

The Institute of International Finance reported that in addition to record defaults, 44 countries applied to the G20 Debt Service Suspension Initiative to suspend debt repayments last year.

The total amount of temporary relief was US$5 billion.

Seventy-three countries are eligible for the G20 program. Most of them are African, Middle Eastern, Latin American and South American countries. Australia’s neighbour Papua New Guinea in on the list.

More than 40 per cent of them are rated by the International Monetary Fund as being at high risk of debt distress or are already in distress.

The IIF report said: “While COVID-19 was certainly an important contributing factor, in many of these cases the pandemic simply exacerbated pre-existing debt problems.”

In November the DSSI was extended until June this year and 18 countries have applied for suspension of repayments due in the first half of this year.

The smaller number of applicants this year “highlights still-accommodative global financial conditions and diminishing liquidity strains, despite heavy external public service obligations for these countries,” the IIF report said.

The IMF has provided more than US$18 billion in financial assistance to DSSI-eligible countries.

The G20 is now working on a multilateral framework for a long-term approach to dealing with unsustainable debt burdens among the 73 countries. Approaches might include restructuring and long-term deferral.