WASHINGTON - The external debts of developing economies have more than doubled from a decade ago to US$9 trillion (S$12 trillion) in 2021, the World Bank said on Tuesday, warning the debt crisis facing these countries has intensified.
The Covid-19 pandemic has forced many countries to take on more borrowing, and World Bank president David Malpass earlier warned that the world is facing a fifth wave of debt crisis.
Many countries are already facing or at risk of debt distress with surging global inflation and rising interest rates.
And global growth is slowing sharply in 2022, with an increased risk of world recession in 2023 amid “one of the most internationally synchronous episodes of… policy tightening” in 50 years, the World Bank said.
“A comprehensive approach is needed to reduce debt, increase transparency and facilitate swifter restructuring – so countries can focus on spending that supports growth and reduces poverty,” Mr Malpass added.
The World Bank said in a release that the poorest countries eligible to borrow from its International Development Association (IDA) now spend more than a tenth of their export revenues to service their long-term public and publicly guaranteed external debt.
This is the highest proportion since 2000, added the Washington-based development lender.
The external debts of IDA countries also nearly tripled in the decade leading up to 2021.
Payments on public debts by the world’s poorest countries are seen rising 35 per cent in 2022 from 2021 to some US$62 billion, while payments for the next two years are expected to remain high partly due to rising interest rates and weakening currencies.
Ghana, which alongside Sri Lanka and Zambia face a debt overhaul, saw its interest payments climb to between 70 and 100 per cent of government revenues, according to Finance Minister Ken Ofori-Atta.
“On the surface, debt indicators seem to have improved in 2021,” the World Bank said. But “this was not the case for IDA countries”, it added.
Vulnerabilities underscore an urgent need to improve debt transparency, it said.
However, the bank’s own Debt Reporting System – a database on lending established in the 1950s – had significant current gaps in borrowing by state-owned enterprises, the World Bank said.
The report also confirmed the changing composition of creditors. At the end of 2021, 61 per cent of the public and publicly guaranteed debt of low- and middle-income countries was owed to private creditors, up from 46 per cent in 2010.
For IDA-eligible countries, the share of private creditors increased fourfold since 2010 to 21 per cent in 2021, while the ratio of external debt to gross national income rose from a fifth to 36.2 per cent over the same period. AFP, REUTERS