The World Bank announced today, Monday, that the debt of low-income countries worldwide rose by 12%, to reach a record level of 860 billion dollars during the year 2020.
The International Debt Statistics Report 2022 stated that the response of governments around the world to the “Covid-19” pandemic with huge packages of fiscal, monetary and financial stimulus, aimed at meeting the needs of the health emergency and mitigating the impact of the pandemic on the poor and the most vulnerable, contributed to the increase in the debt burden. output from low-income countries globally.
The report indicated that even before the outbreak of the pandemic, the external debt stocks of low and middle income countries combined increased by 5.3 percent in 2020 to reach $8.7 trillion, due to the weak position of many low and middle income countries due to slowing economic growth and high levels of public and external debt.
The report stressed that there is an urgent need for a comprehensive approach to debt management, in order to help low- and middle-income countries assess and reduce risks and achieve sustainable debt levels.
For his part, World Bank Group President David Malpass stressed: “We need a comprehensive approach to the debt crisis, including debt reduction, rapid restructuring, and improved transparency.”
The report revealed that debt indicators deteriorated on a large scale and had strong effects on countries in all regions. In low- and middle-income countries, the rise in external indebtedness exceeded gross national income and export growth; The ratio of external debt to GNI for low- and middle-income countries (excluding China) increased to 42% in 2020 from 37% in 2019, while the ratio of debt to exports increased to 154% in 2020 from 126% in 2019.
As a result of the negative repercussions caused by the pandemic, the G-20 launched in April 2020 the debt service suspension initiative to provide temporary liquidity support to low-income countries, and the G-20 countries agreed to extend the postponement period until the end of 2021. In November 2020, the G-20 agreed on a framework Joint Debt Remedies, an initiative to restructure unsustainable debt situations and extended financing gaps in eligible for a debt service suspension initiative.
Since the beginning of the pandemic, the World Bank Group has committed more than $157 billion to combat the health, economic and social impacts of the pandemic, the fastest and largest crisis response in its history.
The financing helps more than 100 countries enhance pandemic preparedness, protect the poor and jobs, and initiate a climate-friendly recovery, and the Bank supports more than 50 low and middle income countries, more than half of them in Africa, through the purchase and distribution of Covid-19 vaccines, and provides $20 billion in financing. For this purpose until the end of 2022.
“Economies around the world face an enormous challenge posed by rising and accelerating debt levels,” said Carmen Reinhart, Senior Vice President and Chief Economist at the World Bank Group. “Policy makers need to prepare for the possibility of a debt crisis when financial market conditions become less benign. Especially in emerging markets and developing economies.
The article World Bank: Low-income countries’ debt to reach $860 billion in 2020 was written in Al Borsa newspaper.