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 Global credit rating agency Moody's Investors Service on Friday said that 2022 saw a spike in the annual sovereign bond defaults with seven countries defaulting on repayments.

In 2023, there were two sovereign defaults - Argentina and Mozambique.

In a report, Moody's said the year 2022 saw the highest number of defaults since 1983.

"Seven sovereigns defaulted during the year, namely Mali (Caa2 stable), Russia (rating withdrawn), Sri Lanka (Ca stable), Belarus (Ca negative), El Salvador (Caa3 stable), Ukraine (Ca stable) and Ghana (Ca stable)," the report states.

"The annual sovereign bond default rate jumped to nearly 5 per cent in 2022, more than five times the average default rate in 1983-2022. There have been two defaults, by the governments of Argentina (Ca stable) and Mozambique (Caa2 positive), in 2023 to date," Moody's said.

As more emerging and frontier market sovereigns face credit stress amid a tightening monetary environment post-pandemic, the share of Caa-C rated sovereigns has increased, said Claire Li, Vice President Senior Analyst, Credit Strategy and Research.

According to Li, a growing share of sovereign ratings at the lower end of the rating distribution signals elevated default risk.

"Economies with significant financing requirements that are heavily dependent on external funding and holding a considerable amount of foreign currency-denominated public debt, with low foreign exchange reserves, are among the most vulnerable," she added.