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Home Foreign News Low-income Countries’ Debt Rises To $850Bn In 2020 - World Bank Report

Low-income Countries’ Debt Rises To $850Bn In 2020 – World Bank Report

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Low-income countries’ debt rose by 12 percent to 860 billion dollars in 2020, the International Debt Statistics (IDS) 2022 report of the World Bank says.

The report was released on Monday at the World Bank/International Monetary Fund (IMF) Annual Meetings in Washington.

The report said that governments around the world responded to the COVID-19 pandemic with massive fiscal, monetary and financial stimulus packages.

It added that the stimulus packages were aimed at addressing health emergencies, cushioning the impact of the pandemic on the poor and vulnerable, and putting countries on a path to recovery.

According to it, even prior to the pandemic, many low- and middle-income countries were in a vulnerable position, with slowing economic growth and public and external debt at elevated levels.

“External debt stocks of low- and middle-income countries combined rose 5.3 percent in 2020 to 8.7 trillion dollars.”

The report said that an encompassing approach to managing debt was needed to help low- and middle-income countries assess and curtail risks and achieve sustainable debt levels.

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It said that the deterioration in debt indicators was widespread and impacted countries in all regions, adding that across all low- and middle-income countries, the rise in external indebtedness outpaced Gross National Income (GNI) and export growth.

“Low- and middle-income countries’ external debt-to-GNI ratio (excluding China) rose to 42 percent in 2020 from 37 percent in 2019 while their debt-to-export ratio increased to 154 percent in 2020 from 126 percent in 2019.

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“In response to the unprecedented challenges posed by the pandemic and at the urging of the World Bank Group and the IMF, in April 2020, the G20 launched the Debt Service Suspension Initiative (DSSI) to provide temporary liquidity support for low-income countries.

“The G-20 countries agreed to extend the deferral period through the end of 2021.

“In November 2020, the G20 agreed on a Common Framework for Debt Treatments beyond the DSSI, an initiative to restructure unsustainable debt situations and protracted financing gaps in DSSI-eligible countries.”

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It, however, said that overall, in 2020, net inflows from multilateral creditors to low- and middle-income countries rose to 117 billion dollars, the highest level in a decade.

Also, that net debt inflows of external public debt to low-income countries rose by 25 percent to 71 billion dollars, also the highest level in a decade.

It said that multilateral creditors, including the IMF, provided 42 billion dollars in net inflows while bilateral creditors accounted for an additional 10 billion dollars.

David Malpass, World Bank Group President, said there was a need for a comprehensive approach to the debt problem, including debt reduction, swifter restructuring, and improved transparency.

He also said that sustainable debt levels were vital for economic recovery and poverty reduction.

Carmen Reinhart, Senior Vice President and Chief Economist of the World Bank said economies across the globe face a daunting challenge posed by high and rapidly rising debt levels.

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“Policymakers need to prepare for the possibility of debt distress when financial market conditions turn less benign, particularly in emerging market and developing economies.”

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The 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).

The report also supports policymakers and analysts by monitoring aggregate and country-specific trends in external debt in low- and middle-income countries.

It provides a comprehensive picture of external borrowing and sources of lending by type of borrower and creditor with information on data availability and comparability. 

© 2021, Scud News. All rights reserved.

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