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Saturday, May 31, 2025

World Bank: Debt-service payments put biggest squeeze on poor countries.

World Bank: Debt-service payments put biggest squeeze on poor countries.

A World Bank report showed on Tuesday that the debt-service payments of countries borrowing from the Bank’s International Development Association (IDA) are protected to top USD 62 billion in 2022.
The poorest countries eligible to borrow from the IDA now spend over a tenth of their export revenues to service their long-term public and publicly guaranteed external debt-the highest proportion since 2000, shortly after the Heavily Indebted Poor Countries (HIPC) initiative was established, according to the WB new International Debt Report. The report highlights rising debt-related risks for all developing economies-low- as well as middle-income economies. At the end of 2021, the external debt of these economies totaled USD nine trillion, more than double the amount a decade ago.

During the same period, the total external debt of IDA countries, meanwhile, nearly tripled to USD one trillion. Rising interest rates and slowing global growth risk tipping a large number of countries into debt crises. About 60 percent of the poorest countries are already at high risk of debt distress or already in distress. “The debt crisis facing developing countries has intensified,” said World Bank Group President David Malpass. “A comprehensive approach is needed to reduce debt, increase transparency, and facilitate swifter restructuring-so countries can focus on spending that supports growth and reduces poverty. “Without it, many countries and their governments face a fiscal crisis and political instability, with millions of people falling into poverty,” Malpass noted.

The rising debt vulnerabilities underscore the urgent need to improve debt transparency and provide more complete debt information to strengthen countries’ ability to manage debt risks and use resources efficiently for sustainable development. Indermit Gill, Senior Vice President and Chief Economist of the World Bank Group, said: “Complete, transparent debt data improves debt management. It makes debt sustainability analyses more reliable.” “And it makes debt restructurings easier to implement, so that countries can return quickly to economic stability and growth. It is not in any creditor’s long-term interest to keep public debt hidden from the public,” Gill added. The new International Debt Report reflects an advance in debt transparency.
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