Low-income countries’ debt rises to $860bn amid pandemic- World bank
Low-income countries’ debt rose by 12 per cent 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 emergency, 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 per cent 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.
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 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.
“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.”
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 per cent 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 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.