Low and middle-income countries spend more than a tenth of export income

NEW YORK - The poorest countries in the world now spend more than a tenth of their export income to service external debt, the highest proportion since 2000, according to the World Bank's annual International Debt report.

The debt overhang is larger as countries slide down the wealth scale with the poorest countries increasing their debt over the past decade at a faster rate than other economies. Among developing economies, debt doubled to $9 trillion, but members of the International Development Association IDA, the World Bank's arm set to help the poorest countries, saw their debt nearly triple to $1 trillion.

At the end of last year, external debt servicing in IDA-eligible countries hit $46.2 billion, about 10.3% of their exports of goods and services. The number stood at 3.2% in 2010 according to the report.

According to World Bank Group President David Malpass, the debt crisis facing developing countries has intensified, according to a statement from World Bank Group President David Malpass. There is a need for a comprehensive approach to reduce debt, increase transparency, and speedier restructuring. The debt service suspension initiative DSSI was established in 2020 after the fallout from COVID 19 sank the global economy. The DSSI allowed 48 countries to defer $8.9 billion in debt servicing through 2021.

The World Bank report said that it was just a minor part of the $99 billion in debt servicing the participating countries.

Payments on public debt by the world's poorest countries are expected to increase by 35% this year from 2021 to some $62 billion, while payments for the next two years are expected to remain high due to rising interest rates and weakening currencies.

According to Ken Ofori-Atta, Finance Minister Ken Ofori-Atta said that Ghana, which is facing a debt overhaul, saw its interest payments climb to between 70% and 100% of government revenues.

There is an urgent need for more debt transparency to help countries manage risk and speed up debt overhauls where needed, according to the World Bank. However, the bank's own Debt Reporting System - a database on lending established in the 1950 s - had significant gaps in borrowing by state-owned enterprises, according to the World Bank.

The report also confirmed the changing composition of the creditors.

At the end of 2021, 61% of the public and publicly guaranteed debt of low and middle-income countries were owed private debt, up from 46% in 2010.

Since 2010 the share of private creditors has gone up by fourfold to 21% in 2021 for countries with IDA-eligible countries, while the ratio of external debt to gross national income GNI increased from a fifth to 36.2% over the same period.