Washington — The World Bank said in a report released that the debt burden of low-income countries in the world increased by 12% to a record $ 860 billion in 2020. Monday.
World Bank Governor David Malpass said the report shows a dramatic increase in debt vulnerability facing low- and middle-income countries and is urgent to help countries reach more sustainable debt levels. He said he called for action.
“We need a comprehensive approach to debt issues, including debt reduction, rapid restructuring and increased transparency,” Malpas said in a statement accompanying the new International Debt Statistics 2022 Report.
“Sustainable debt levels are essential for economic recovery and poverty reduction,” he said.
According to the report, the external debt balance of low- and middle-income countries increased by 5.3% to $ 8.7 trillion in 2020, affecting countries in all regions.
The increase in external debt outpaced the growth in gross national income (GNI) and exports, with the ratio of external debt to GNI excluding China rising 5 points to 42% in 2020, and the debt-to-export ratio soared. .. From 126% in 2019 to 154% in 2020.
Malpas said debt restructuring efforts are urgently needed given that a group of debt suspension initiatives (DSSIs) in 20 major economies proposing a temporary deferral of debt repayment will expire at the end of this year. Said that.
The G20 and Paris Club public creditors launched a common framework for debt processing last year to reconstruct the unsustainable debt situation and the protracted funding gap in DSSI-eligible countries. It has been applied to only three countries, Ethiopia, Chad and Zambia.
The report showed that net inflows from multilateral creditors into low- and middle-income countries increased to $ 117 billion in 2020. This is the highest level in 10 years.
Net lending to low-income countries increased 25% to $ 71 billion, also the highest level in 10 years, with the IMF and other multilateral creditors at $ 42 billion and bilateral creditors at $ 10 billion. providing.
Carmen Reinhardt, chief economist at the World Bank, said the challenges faced by heavy debters could be exacerbated as interest rates rise.
“Policymakers need to be prepared for a potential debt crisis when financial market conditions are less favorable, especially in emerging and developing countries,” she said.
The World Bank said it has expanded its 2022 report to increase transparency on global debt levels by providing more detailed and fragmented data on external debt.
The data currently includes a breakdown of the borrowing country’s external debt stock, showing the amount payable to each public and private creditor, the currency structure of this debt, and the terms under which the loan has been extended.
For DSSI eligible countries, the data also show debt repayments postponed to 2020 by each bilateral creditor and monthly debt repayment forecasts to be paid to them by 2021.