Dream - As many as 83 countries, including countries with the world's largest economies such as the United States (US), Germany, Japan, and England, have experienced bankruptcy in the last two centuries. When a country goes bankrupt, the most fundamental systems and institutions will disappear. Electric companies cease operations, gas pumps close, grocery stores run out of food supplies, banks shut down, and the government is unable to pay its civil servants' salaries. Currently, we still see a number of countries on the brink of bankruptcy.

Although not widely known, the United States has declared bankruptcy five times since its founding. One time was due to the inability to pay its foreign debt, and four times because the US was unable to pay its domestic debt. These bankruptcies were caused by financial crises in the banking sector, the first occurring in 1790 and the last in 1933. In contrast, Germany has experienced bankruptcy eight times in the last 215 years.

Currently, it is the country with the fourth largest economy in the world and the largest in the European Union. Germany last experienced bankruptcy in 1939 and 1948, due to World War II. However, the country is now economically successful due to its strict monetary policy. The United Kingdom, the fifth largest economy in the world, has also experienced bankruptcy four times, with the most recent occurring in 1932.***

Bankruptcy of a country means that the government has failed to make debt and interest payments on time. Failure to pay debts to creditors can be accompanied by an official announcement by the government that it will not repay the debt, or sometimes it occurs without an official announcement. Almost half of the countries in Europe, 40% of countries in Africa, and 30% of countries in Asia have declared bankruptcy in the last two centuries.

Ecuador most frequently declares itself bankrupt among sovereign nations. It has declared bankruptcy 10 times. Brazil, Mexico, Uruguay, Chile, Costa Rica, Spain, and Russia have declared bankruptcy 9 times in the same period. Germany has experienced bankruptcy 8 times in two and a half years, making it the leading economy in experiencing bankruptcy, followed by the United States 5 times, China and England 4 times, and Japan twice.

In the modern era, Russia declared bankruptcy in the late nineties. And in 2001, Argentina also declared bankruptcy. Iceland went bankrupt in 2008 with a debt of $85 billion or Rp 1.325 trillion when the global credit market dried up following the collapse of the US financial sector. The banking bubble had grown so large that by 2008, the banking system had a debt 10 times the GDP of Iceland. When the three largest banks went bankrupt in the largest systematic banking collapse in history, the country experienced a depression, and its economy contracted by 10% over the next two years.

Interestingly, Iceland has experienced a solid recovery since this crisis, with unemployment rates remaining stable at 4%, and in 2014, its economy grew 1% larger compared to before 2008. Argentina declared bankruptcy in 2001 with a debt of U$ 145 billion or Rp 2.661 trillion due to its policy of pegging the peso to the US dollar, uncontrolled public debt, and rampant corruption, which made the country unable to withstand several economic shocks.

Interestingly, Iceland has experienced a solid recovery since this crisis, with unemployment rates remaining stable at 4%, and in 2014, its economy grew 1% larger compared to before 2008. Argentina declared bankruptcy in 2001 with a debt of U$ 145 billion or Rp 2.661 trillion due to its policy of pegging the peso to the US dollar, uncontrollable public debt, and rampant corruption, which made the country unable to withstand several economic shocks.

RusiaThroughout history, Russia has declared bankruptcy 9 times. The most recent one was in 1998, with a debt of $17 billion or Rp 265 trillion. The impact of the Asian financial crisis and the decrease in oil demand started putting pressure on the Russian economy, resulting in a massive international debt and suffering from a decline in national productivity. The Ruble currency crisis in 1998 caused the Russian stock market to lose 75% of its value and inflation reached 80% as investors left the market.

Russia will only be able to repay less than U$10 billion out of its U$17 billion debt to the International Monetary Fund or IMF, and the Russian economy experienced a contraction of 5.3% in 1998 as unemployment reached 13%. Mexico failed to repay its U$80 billion or Rp 1.247 trillion state loans in 1982. Public debt grew rapidly due to the massive fiscal expansion program carried out by the Luis Echeverria government.

Following the oil shock in the late 1970s and worsening economic conditions, the Mexican peso depreciated by 50%. However, the government was still unable to repay its debt, leading to Mexico's failure to repay its loans to the US and IMF. Over the next five years, Mexico's GDP declined by 11% and triggered the Latin American Debt Crisis, which caused countries in this region to be unable to repay their foreign debts, forcing the IMF to provide loans in exchange for highly unpopular reforms.

Libanon Crisis The Lebanon crisis began in late 2019 after the government announced new tax proposals, including a monthly fee of $6 or IDR 93,000 for the use of Whatsapp voice calls. These measures sparked long-standing anger against the ruling class and led to months-long mass protests. Unregulated capital controls were implemented, causing people to lose their savings as the currency value began to soar.

"In March 2020, Lebanon failed to repay its massive debt, which at that time amounted to around $90 billion or Rp 1,403 trillion or 170% of GDP - one of the highest in the world. In June 2021, when the currency lost nearly 90% of its value, the World Bank declared this crisis as one of the worst experienced by the world in over 150 years. In April 2020, the Deputy Prime Minister of the Lebanese government, Saadeh al-Shami, announced the country's bankruptcy and the bankruptcy of the Central Bank of Lebanon. The losses were distributed to the country, Banque du Liban, banks, and depositors."

SrilankaSri Lanka has become the latest example of a country's bankruptcy due to its failure to repay foreign loans and becoming a defaulting nation. The new Prime Minister of Sri Lanka, Ranil Wickremesinghe, acknowledged this bankruptcy and told parliament that the unprecedented economic crisis will continue until at least the end of next year. Unable to repay its foreign debt of $51 billion or Rp 795 trillion in June 2022, the government declared a default in April and is currently negotiating with the International Monetary Fund (IMF) for possible bailout funds.***

The increase in the value of the dollar to its highest level in two decades has also destroyed the purchasing power of most currencies in the international market. Concerns about economic decline and depleted foreign reserves indicate that a large number of developing countries are currently facing difficulties. Many developing countries are currently facing difficulties due to economic sluggishness similar to that of Sri Lanka, including common debt crises, indications of currency depreciation, 1,000 basis point bond spreads, and foreign reserves.

The increasing loan prices, inflation, and debt have sparked concerns about an economic collapse, with analysis indicating that Sri Lanka, Lebanon, Russia, Suriname, and Zambia have already experienced debt defaults, Belarus is on the brink of default, and at least a dozen other countries are in danger of default. The total value is extremely alarming. Analysts estimate that the debt of $400 billion or Rp 6,328 trillion is at risk, using a bond spread of 1,000 basis points as the threshold.

Argentina is the largest, with more than U$ 150 billion or Rp 2,339 trillion, followed by Ecuador and Egypt, each with U$ 40 billion and U$ 45 billion or Rp 623 trillion and Rp 701 trillion. The Russian Ruble and the Brazilian Real are the only currencies that have strengthened against the dollar this year, which according to many market experts is due to capital control.

Investors are questioning how long the dollar surge can last, but many are waiting to turn bearish on the dollar before doing so. Compared to other countries, the dollar has increased nearly 13 percent this year, reaching its highest level in two decades. It is also on track to have its best year since 1997, thanks to the aggressive policies of the Federal Reserve and investors seeking protection from global economic uncertainty.

Ecuador This Latin American country recently experienced a default two years ago, but protests accompanied by violence and attempts to overthrow President Guillermo Lasso have plunged the country into chaos. The country has a large debt, and JPMorgan has raised its prediction for the public sector fiscal deficit to 2.4 percent of GDP this year and 2.1 percent of GDP next year due to government subsidies for food and fuel. Spreads on bonds have exceeded 1,500 bps.

Ecuador This Latin American country recently experienced a default two years ago, but protests accompanied by violence and attempts to overthrow President Guillermo Lasso have plunged the country into chaos. The country has a large debt, and JPMorgan has raised its prediction of the public sector fiscal deficit to 2.4 percent of GDP this year and 2.1 percent of GDP next year due to government subsidies for food and fuel. Spreads on bonds have exceeded 1,500 bps.

Egypt With a debt-to-GDP ratio of around 95%, Egypt is experiencing one of the largest outflows of foreign funds this year, according to JPMorgan's estimates, totaling around $11 billion or Rp 171 trillion. Egypt is expected to repay a total of $100 billion or Rp 1,559 trillion in hard currency debt over the next five years, including bonds worth $3.3 billion or Rp 51 trillion in 2024, according to asset management company FIM Partners.

Kairo has devalued the Egyptian pound by 15 percent and requested assistance from the IMF in March. However, bond spreads have increased to over 1,200 basis points, and credit default swaps (CDS), an instrument used by investors to manage risk, now factor in a 55 percent possibility that Cairo will fail to repay its debts. However, according to Francesc Balcells, CIO of Emerging Markets Debt at FIM Partners, around half of the $100 billion that Egypt is due to pay in 2027 will be channeled to the IMF or through bilateral agreements, mostly in the Gulf.

El Salvador's trust level plummeted after making bitcoin a legal tender and closing the door to IMF's hope. Investor confidence has declined to bonds worth U$800 million or Rp403 billion, with a six-month trading period at a 30 percent discount and long-term bonds at a 70 percent discount.

Ghana's loan frenzy has caused Ghana's debt-to-GDP ratio to increase to nearly 85 percent. The country has spent over half of its tax revenue on debt interest payments, and its currency, the cedi, has lost about a quarter of its value this year. In addition, inflation has increased by a third. Kenya.

About 30 percent of Kenya's income is used to pay off loan interest. Because the country does not have access to financing markets and has bonds worth over half a billion dollars maturing in 2024, this situation becomes a problem. "These countries are the most vulnerable solely due to the relative amount of debt maturing compared to reserves, and fiscal issues in terms of stabilizing the debt burden," said David Rogovic from Moody's about Kenya, Egypt, Tunisia, and Ghana.