Poor countries’ debt servicing is the costliest since 2000 – World Bank

The world’s poorest countries are now spending more than a tenth of their export earnings on external debt, the highest share since 2000, the World Bank said in its annual international debt report on Tuesday.

Excess debt is higher as countries move down the wealth scale, with the poorest countries increasing their debt much faster than other economies over the past decade. The external debt of developing economies doubled to $9 trillion, but the debt of members of the International Development Association (IDA), the World Bank’s fund for helping the poorest countries, nearly tripled to $1 trillion.

External debt service in IDA-eligible countries reached 46.2 billion at the end of last year. USD, ie about 10.3% of their exports of goods and services. According to the report, in 2010 this figure was 3.2 percent.

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“The debt crisis facing developing countries has intensified,” World Bank Group President David Malpass said in a statement. “A comprehensive approach is needed to reduce debt, increase transparency and facilitate faster restructuring.”

Plans to ease debt payments are nothing new. in 2020 the Debt Service Suspension Initiative (DSSI) was created after the COVID-19 recession hit the global economy. DSSI has allowed 48 countries to set aside approximately $8.9 billion. USD debt service until 2021.

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However, according to a World Bank report, this was only a small fraction of the $99 billion.

Payments for the public debt of the world’s poorest countries this year from 2021. will increase by 35% to around 62 billion

Speaking earlier this week, Finance Minister Ken Ofori-Atta, Ghana, which is facing a debt restructuring along with Sri Lanka and Zambia, has seen its interest rate rise to between 70% and 100% of government revenue.

The World Bank also said greater debt transparency is urgently needed to enable countries to manage risks and accelerate debt reviews if necessary. But the bank’s own debt reporting system, a lending database built in the 1950s, had significant gaps in current state-owned enterprise borrowing, the World Bank said.

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The report also confirmed the changing composition of creditors.

in 2021 at the end of 2010, 61% of low- and middle-income countries’ state and state-guaranteed debts were owed to private creditors, and in 2010 they were 46%.

Share of private creditors in IDA-eligible countries since 2010 quadrupled to 21% in 2021, while the ratio of external debt to gross national income (GNI) increased by a fifth to 36.2% over the same period.

Reporting by Rodrigo Campos, editing by Karin Strohecker and Chizu Nomiyama

Our Standards: The Thomson Reuters Trust Principles.

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