The pandemic, the Ukraine war, and domestic strife have led governments, including Argentina, Ecuador, Ethiopia, Ghana, Sri Lanka and Zambia, to default since 2020.

Investors do not expect more sovereign defaults in 2025, but credit metrics for smaller and riskier countries, known as frontier markets, point to a structural weakening, especially for governments in Africa, Thomas Lambert, of Lazard's sovereign advisory team, said.

The United States (US) Federal Reserve decided to hold its benchmark interest rate, the basis for global borrowing rates, on Wednesday. Markets expect it to be steady until June as Donald Trump's second administration has left the policy backdrop extremely uncertain.

Lambert said the refinancing profile for the most fragile nations was modest this year, but that could change between 2026-28 when larger repayments will be due.

"So it is plausible that in these years a new cycle could start again,” Lambert, one of the authors of the Lazard paper published this week on the subject, told Reuters.

High US rates add to the difficulties of refinancing, and the paper said the "distance to default has diminished for many countries".

--Reuters--