Poor countries’ debt rose 12% to record $860 bln in 2020- World Bank
Andrea Shalal
WASHINGTON, Oct 11 (Reuters) – The
World
Bank
on Monday warned of a significant
12%
rise in the
debt
burden of the
world
‘s low-income countries to a
record
$860 billion in
2020
as a result of the COVID-19 pandemic, and called for urgent efforts to reduce
debt
levels.
World
Bank
President David Malpass told reporters 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.
“We need a comprehensive approach to the
debt
problem, including
debt
reduction, swifter restructuring and improved transparency,” Mr. Malpass said in a statement accompanying the new report.
He said half of the
world
‘s
poor
est countries were in external
debt
distress or at high risk of it.
Mr. Malpass said sustainable
debt
levels were needed to help countries achieve economic recovery and reduce poverty.
The report said the external
debt
stocks of low- and middle-income countries combined
rose
5.3% in
2020
to $8.7 trillion, affecting countries in all regions.
It said the rise in external
debt
outpaced gross national income (GNI) and export growth, with the external
debt
-to-GNI ratio, excluding China, rising five percentage points to 42% in
2020
, while their
debt
-to-export ratio surged to 154% in
2020
from 126% in 2019.
Mr. Malpass said
debt
restructuring efforts were urgently needed given the expiration at the end of this year of the Group of 20 major economies’
Debt
Service Suspension Initiative (DSSI), which has offered temporary deferral of
debt
payments.
The G20 and Paris Club of official creditors launched a Common Framework for
Debt
Treatments last year to restructure unsustainable
debt
situations and protracted financing gaps in DSSI-eligible countries, but only three countries – Ethiopia, Chad and Zambia – have applied thus far.
Mr. Malpass said further
debt
payment freezes could be included as part of Common Framework
debt
restructurings, but more work was also needed to increase the participation of private sector creditors, who have thus far been reluctant to get involved.
The report showed that net inflows from multilateral creditors to low- and middle-income countries
rose
to $117 billion in
2020
, the highest level in a decade.
Net lending to low-income countries
rose
25% to $71 billion, also the highest level in a decade, with the IMF and other multilateral creditors providing $42 billion and bilateral creditors $10 billion, it said.
Carmen Reinhart, the
World
Bank
‘s chief economist, said the challenges facing highly in
debt
ed countries could get worse as interest rates
rose
.
The
World
Bank
said it expanded the 2022 report to boost transparency about global
debt
levels by providing more detailed and disaggregated data on external
debt
.
The data now include a breakdown of a borrowing country’s external
debt
stock to show the amount owed to each official and private creditor, the currency composition of this
debt
, and the terms on which loans were extended.
For DSSI-eligible countries the data also show the
debt
service deferred in
2020
by each bilateral creditor and the projected month-by-month
debt
-service payments owed to them through 2021. –
Reuters