The debt burden of world’s low-income countries rose 12 per cent to a record 860 billion dollars in 2020, said a new World Bank report. In the International Debt Statistics 2022 report, the World Bank said that many low- and middle-income countries were in a vulnerable position even before the pandemic. Slowing economic growth and public and external debt at elevated levels led to the economic slow down, the report added.
“External debt stocks of low- and middle-income countries combined rose 5.3 per cent in 2020 to 8.7 trillion dollars. An encompassing approach to managing debt is needed to help low- and middle-income countries assess and curtail risks and achieve sustainable debt levels,” the report mentioned.
INDICATORS
The World Bank report mentions that deterioration in debt indicators was widespread and impacted countries in all regions. The rise in external indebtedness outpaced Gross National Income (GNI) and export growth in all the low and middle income countries. The external debt to GNI ratio (excluding China) in these countries rose to 42 per cent in 2020 from 37 per cent in 2019 while their debt-to-export ratio increased to 154 per cent in 2020 from 126 per cent in 2019.
The report pointed out that net inflows from multilateral creditors to low- and middle-income countries rose to 117 billion dollars in 2020. This was the highest level in a decade. It also said that net debt inflows of external public debt to low-income countries rose 25 per cent to 71 billion dollars. Multilateral creditors, including the IMF, provided 42 billion dollars in net inflows while bilateral creditors accounted for an additional ten billion dollars.
Senior Vice President and Chief Economist of the World Bank Group Carmen Reinhart said; “economies across the globe face a daunting challenge posed by high and rapidly rising debt levels, Policymakers need to prepare for the possibility of debt distress when financial market conditions turn less benign, particularly in emerging market and developing economies.”
Noting that greater debt transparency was critical in addressing the risks posed by rising debt in many developing countries, the World Bank stated that International Debt Statistics 2022 was expanded to provide more detailed and disaggregated data on external debt than ever before. The data gave the breakdown of a borrowing country’s external debt stock to show the amount owed to each official and private creditor, the currency composition of this debt, and the terms on which loans were extended. For DSSI-eligible countries the dataset was expanded to include the debt stock to show the amount owed to each official and private creditor, the currency composition of this debt, and the Terms on which loans were extended.
International Debt Statistics (IDS) is a longstanding annual publication of the World Bank featuring external debt statistics and analysis for the 123 low- and middle-income countries that report to the World Bank Debt Reporting System (DRS).
COVID-19
Since the c beginning of COVID-19 pandemic, the World Bank said that it deployed over 157 billion dollars to fight the health, economic, and social impacts of the pandemic. It said the financing was helping more than 100 countries strengthen pandemic preparedness, protect the poor and jobs, and jump start a climate-friendly recovery. The World bank also noted that it supported over 50 low- and middle-income countries with the purchase and deployment of COVID-19 vaccines, and is making available 20 billion dollars in financing for this purpose until the end of 2022.
