Poor countries debt rose to $860 BLN

The World Bank warned of a significant 12% rise in the debt burden of the world’s low-income countries to a record $860 billion in 2020. This is a result of this pandemic. World Bank President David Malpass said that the bank’s International Debt Statistics 2022 report showed a dramatic increase in the debt vulnerabilities facing low- and middle-income countries. He also urged for comprehensive efforts to help countries reach more sustainable debt levels.

Malpass said in a statement that they need a comprehensive approach to the debt problem, including debt reduction, swifter restructuring and improved transparency. He said half of the world’s poorest countries were in external debt distress or at high risk of it. Malpass said that sustainable debt levels were needed to help countries achieve economic recovery and reduce poverty. The report said that the external debt stocks of low- and middle-income countries combined rose 5.3% in 2020 to $8.7 trillion. It said that the rise in external debt outpaced gross national income (GNI) and export growth. Malpass also said that the debt restructuring efforts were urgently needed given the expiration at the end of this year.

The G20 and Paris Club of official creditors launched a Common Framework for Debt Treatments last year. This is to restructure unsustainable debt situations and protracted financing gaps in DSSI-eligible countries. Malpass said that further debt payment freezes could be included as part of Common Framework debt restructurings. The report showed that net inflows from multilateral creditors to low- and middle-income countries rose to $117 billion in 2020. Net lending to low-income countries rose 25% to $71 billion. Carmen Reinhart, the World Bank’s chief economist, said that the challenges facing highly indebted countries could get worse as interest rates rose. The World Bank said that it expanded the 2022 report. This is to boost transparency about global debt levels. The data now include a breakdown of a borrowing country’s external debt stock. This is to show the amount owed to each official and private creditor. For DSSI-eligible countries the data also show the debt service deferred in 2020.