Debt 'crushes' world's poorest economies

“ Public debt in these countries, which account for about 40% of the global population, is now at an average of 72% of GDP, the highest in the past 18 years, ” the WB report pointed out.

Accordingly, the amount of international aid received by the poorest countries has fallen to its lowest level in two decades.

Low-income economies need to improve their fiscal health on their own, but they also need stronger support from abroad, said World Bank economist Ayhan Kose.

The World Bank report recommends that poor economies need to do more to help themselves, through improving the efficiency of public spending and increasing tax revenues.

The financial situation of the 26 poorest countries is getting worse. Photo: Pixabay

Low-income economies have borrowed heavily during the Covid-19 pandemic, tripling their primary budget deficits.

The World Bank stressed that currently, nearly half of the 26 poorest economies are in debt distress or at high risk of falling into this situation, double the number in 2015.

Meanwhile, the International Development Association (IDA), a World Bank organization that finances the poorest countries, said it provided nearly half of the development aid the poorest countries received from multilateral organizations in 2022.

World Bank economist Indermit Gill said the IDA has become a lifeline for the poorest countries.

If the poorest countries are to escape the prolonged emergency and achieve key development goals, they need to increase investment at an unprecedented rate, he said.

In addition, according to the WB report, efforts to reduce poverty have encountered many difficulties and the bank is trying to mobilize 100 billion USD to supplement financial funds for the poorest countries through IDA.

According to the WB, poor countries, with per capita income below $1,145/year, are increasingly dependent on IDA aid and loans with near-zero interest rates.

IDA is typically replenished every three years through contributions from World Bank member countries. It raised a record $93 billion in 2021.

Natural disasters have also taken a greater toll on these countries over the past decade. Between 2011 and 2023, natural disasters caused an average annual loss of 2% of GDP, five times the average in lower-middle-income countries, highlighting the need for greater investments in disaster preparedness.

The majority of the countries studied are in sub-Saharan Africa, from Ethiopia to Chad and Congo, with Afghanistan and Yemen also included. Two-thirds of these countries are in a state of armed conflict or struggle to maintain order due to institutional and social weaknesses that discourage foreign investment. Most of these countries are dependent on commodity exports, making them vulnerable to cycles of economic boom and bust.

The report, released ahead of the annual meetings of the World Bank and the International Monetary Fund (IMF) in Washington, highlights a major setback in efforts to reduce poverty.

Source: https://congthuong.vn/no-nan-de-bep-cac-nen-kinh-te-ngheo-nhat-the-gioi-352264.html