In the global economic landscape, a shadow hangs over the world’s 26 poorest economies. According to a recent World Bank report, these nations are facing a debt burden that has not been seen since 2006. With government debt averaging 72% of their GDP, a level not seen in 18 years, these countries are struggling to find a sustainable financial balance. This situation is all the more worrying given that they are home to approximately 40% of the world’s population.
At the same time, the international assistance they receive as a proportion of their economic output has declined to a level not seen in two decades. This combination of factors places these vulnerable economies in a critical situation.
The economic crisis induced by the Covid-19 pandemic has led to a significant increase in the indebtedness of these low-income countries. Primary deficits have tripled, and many nations are now unable to absorb these deficits.
The World Bank notes that nearly half of these 26 poorest countries are now in financial distress or at high risk of default, a figure that is twice as high as in 2015.
The International Development Association (IDA), the World Bank’s concessional lending arm, has become a key player in supporting the development of these fragile economies. In 2022, IDA provided nearly half of the development assistance these countries received from multilateral organizations.
World Bank officials recognize that low-income economies must first help themselves, but they also emphasize the importance of increased financial support from the international community.
To break out of this debt spiral and achieve their development goals, low-income economies will need to accelerate their investments at an unprecedented pace. Given this emergency, it is imperative that developed countries and international financial institutions strengthen their commitment to these vulnerable countries.