What if Sri Lanka relapses into default?
Post-restructuring Sri Lanka sliding back toward default as tourism/remittance recovery stalls spooks frontier creditors: short Sri Lankan dollar bonds and frontier credit risk; the small global cascade is correctly sized. Rhymes directly with Sri Lanka's own 2022 default — a tourism/remittance-dependent BoP that cracked once external buffers thinned. Transmission stays within frontier EM credit. Forward: a relapse so soon after the 2023-24 restructuring would chill the entire frontier-debt asset class, raising new-issue premia for peers far more than the standalone size implies.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Post-restructuring Sri Lanka stumbles back toward default as tourism and remittance recovery stalls, spooking frontier creditors. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Growth surprise ▼ — which propagate through our causal graph to the markets below.