The 26 poorest countries, home to 40% of the world’s most destitute, are burdened with their highest debt levels since 2006, leaving them increasingly vulnerable to natural disasters and economic shocks, according to a World Bank report released Sunday.
The findings paint a grim picture of these economies, now poorer than they were before the COVID-19 pandemic, as the rest of the world resumes its growth trajectory.
The report, published ahead of the World Bank and International Monetary Fund (IMF) annual meetings, highlights a major setback in the global fight to eradicate extreme poverty.
It also underpins the World Bank’s push to raise $100 billion to replenish the International Development Association (IDA), the financing lifeline for these struggling nations.
Despite global recovery efforts, these low-income economies, with annual per capita incomes below $1,145, remain heavily reliant on IDA grants and low-interest loans, as market financing has dried up.
The average debt-to-GDP ratio of these countries has soared to 72%, an 18-year high. Alarmingly, half of them are either in debt distress or at high risk of falling into it.
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Many of these nations are plagued by armed conflict or institutional fragility, further deterring foreign investment and exacerbating their reliance on commodity exports, which expose them to volatile boom-and-bust cycles.
“At a time when much of the world simply backed away from the poorest countries, IDA has been their lifeline,” remarked World Bank chief economist Indermit Gill.
Natural disasters have only worsened their plight. Between 2011 and 2023, these countries faced average annual losses of 2% of GDP due to disasters—five times higher than lower-middle-income nations.
Yet, the solutions seem distant, unattainable even, with calls for greater self-reliance met by weak governance and inefficient public spending.
As the report suggests, simplifying tax systems and improving fiscal management are far from the comforting answers these nations crave.
World Bank President Ajay Banga is striving to exceed the record $93 billion raised for IDA in 2021, aiming for over $100 billion by December.
But with an unpredictable future, shattered economies, and no clear way out, the question remains: Is this a lifeline or a brief respite before an inevitable plunge?
