Sri Lanka’s default has been long foretold. High financing costs, a reliance on foreign denominated debt and a limited revenue base made it a canary in the coal mine for frontier markets facing debt crises. Sri Lanka and others could muddle along without the fiscal buffers expended on the COVID-19 crisis, but now the war in Ukraine has unleashed a wave of new pressures on economies and treasuries.

So, who’s next? Pakistan’s new government inherits similarly strained debt indicators as ousted PM Imran Khan urges his supporters onto the streets. Tunisia is also suffering from political turmoil and a dearth of tourists. Ghana and Nigeria’s oil and gas revenues may be insufficient to offset their strikingly high debt service to revenue ratios, and their political situations do not augur well for bold policy solutions. Kenya faces the same situation but without hydrocarbon revenues. Smaller states are especially vulnerable; questionable presidential prestige projects have placed Montenegro and El Salvador at even more risk. Meanwhile, inflation increases civil unrest risks in countries with less immediate debt issues. Senegal, South Africa, Central Asia and Latin America have experienced a wave of unrest in the last year and, along with the Middle East, look primed for more as food security challenges mount.

While Sri Lanka’s looming default was no surprise, it has sparked a political crisis and social unrest characterised by unexpected unity for a country bitterly polarised along political, ethnic and religious lines. Just as the pandemic expended the coping capacity of states, it has done the same for publics weary from economic stresses pre-dating COVID-19. Defaults tend to hit the poor hardest, a double blow when paired with soaring inflation. This is a recipe for the type of “Social Explosion” that rocked Chile in 2019 and continues to reorder its political economy. The World Bank expects a dozen defaults in the next year, promising plenty of sparks for abundant tinder.

This article first appeared in the Axco Flashpoints newsletter, which provides monthly analysis on country risk and geopolitics from our Global Risk team. You can sign up at