Debt Crisis Deepens for the World’s 26 Poorest Nations, Says World Bank – Novinite.com

The 26 poorest countries in the world, which collectively house 40% of the globe’s most impoverished population, have accumulated significant debt since 2006. According to a new report from the World Bank, these nations are increasingly susceptible to natural disasters and economic shocks, as reported by Reuters and BTA.

The findings indicate that these countries are, on average, in a worse financial position than they were before the COVID-19 pandemic, despite the global recovery seen in many other regions. The report was released just ahead of the annual meetings of the World Bank and the International Monetary Fund (IMF) in Washington and underscores a significant barrier to efforts aimed at eradicating extreme poverty. It also highlights the World Bank’s initiative this year to raise 100 billion dollars to bolster its fund for the world‘s poorest countries, known as the International Development Association (IDA).

These economically vulnerable nations, characterized by an annual per capita income of less than 1,145 dollars, have increasingly relied on grants and loans with near-zero interest rates since traditional market financing has largely dried up. The average debt-to-GDP ratio for these countries has reached an 18-year peak of 72 percent, with half of them either in debt distress or at a high risk of entering such a state.

The majority of the countries analyzed in the report are situated in sub-Saharan Africa, including nations like Ethiopia, Chad, and Congo, while Afghanistan and Yemen are also on the list. Two-thirds of these poorest countries are currently experiencing armed conflict or struggling with governance issues, which significantly hinder foreign investment and nearly all exports.

World Bank Chief Economist Indermit Gill stated, “At a time when much of the world simply turned away from the poorest countries, the Association for International Development was their lifeline.” This association is replenished every three years through contributions from World Bank shareholder nations, having raised a record 93 billion dollars in 2021. Its president, Ajay Banga, is striving to increase this to over 100 billion dollars.

Over the past decade, natural disasters have severely impacted these nations, with average annual losses equating to 2 percent of GDP between 2011 and 2023. This figure is five times greater than the average for lower-middle-income countries, emphasizing the need for enhanced investment in these regions. The report advocates for economies with significant shadow markets to pursue reforms that improve tax collection, streamline taxpayer registration, and enhance public spending efficiency.

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