Debt-Service Payments Put Biggest Squeeze on Poor Countries Since 2000

IDA Countries’ Debt-Service Payments Projected to Top $62 Billion in 2022

WASHINGTON, Dec. 6, 2022—The poorest countries eligible to borrow from the World Bank’s International Development Association (IDA) now spend over a tenth of their export revenues to service their long-term public and publicly guaranteed external debt—the highest proportion since 2000, shortly after the Heavily Indebted Poor Countries (HIPC) initiative was established, the World Bank’s new International Debt Report shows.

The report highlights rising debt-related risks for all developing economies—low- as well as middle-income economies. At the end of 2021, the external debt of these economies totaled $9 trillion, more than double the amount a decade ago. During the same period, the total external debt of IDA countries, meanwhile, nearly tripled to $1 trillion. Rising interest rates and slowing global growth risk tipping a large number of countries into debt crises. About 60% of the poorest countries are already at high risk of debt distress or already in distress.

At the end of 2021, IDA-eligible countries’ debt-service payments on long-term public and publicly guaranteed external debt totaled $46.2 billion—equivalent to 10.3% of their exports of goods and services and 1.8% of their gross national income (GNI), according to the report. Those percentages were up significantly from 2010, when they stood at 3.2% and 0.7% respectively. In 2022, IDA countries’ debt-service payments on their public and publicly guaranteed debt are projected to rise by 35 percent to more than $62 billion, one of the highest annual increases of the past two decades. China is expected to account for 66% of the debt-service payments to be made by IDA countries on their official bilateral debt.

“The debt crisis facing developing countries has intensified,” said World Bank Group President David Malpass. “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. Without it, many countries and their governments face a fiscal crisis and political instability, with millions of people falling into poverty.”

On the surface, debt indicators seem to have improved in 2021, the report shows. As economic growth resumed following the global recession in 2020, public and publicly guaranteed external debt as a share of GNI returned to pre-pandemic proportions. However, this was not the case for IDA countries, where the debt- to-GNI ratio remained above the pre-pandemic level at 25%. Moreover, the economic outlook has deteriorated considerably.

In 2022, global growth is slowing sharply. Amid one of the most internationally synchronous episodes of monetary and fiscal policy tightening the world has seen in 50 years, the risk of a global recession next year has been rising. Currency depreciations have made matters worse for many developing countries whose debt is denominated in U.S. dollars. The 2021 debt-to-GNI improvement, as a result, is likely temporary.

Over the past decade, the composition of debt owed by IDA countries has changed significantly. The share of external debt owed to private creditors has increased sharply. At the end of 2021, low- and middle-income economies owed 61% of their public and publicly guaranteed debt to private creditors—an increase of 15 percentage points from 2010. IDA-eligible countries owed 21% of their external debt to private creditors by the end of last year, a 16-point increase from 2010. Also, the share of debt owed to government creditors that don’t belong to the Paris Club (such as China, India, Saudi Arabia, United Arab Emirates, and others) has soared. At the end of 2021, China was the largest bilateral lender to IDA countries, accounting for 49% of their bilateral debt stock—up from 18% in 2010. These developments have made it much harder for countries facing debt distress to quickly restructure their debt.

The rising debt vulnerabilities underscore the urgent need to improve debt transparency and provide more complete debt information to strengthen countries’ ability to manage debt risks and use resources efficiently for sustainable development. 

“Poor debt transparency is the reason so many countries sleepwalk into a debt crisis,” said Indermit Gill, Senior Vice President and Chief Economist of the World Bank Group. “Complete, transparent debt data improves debt management. It makes debt sustainability analyses more reliable. And it makes debt restructurings easier to implement, so that countries can return quickly to economic stability and growth. It is not in any creditor’s long-term interest to keep public debt hidden from the public.”

The new International Debt Report reflects an advance in debt transparency. It draws from the World Bank’s International Debt Statistics database—the most comprehensive source of comparable cross-country information on the external debt of low- and middle-income countries. It improves on the earlier International Debt Statistics reports by adding substantive analysis and expanding both the breadth and specificity of the data in it.

Over the past five years, the International Debt Statistics database has identified and added $631 billion of previously unreported loan commitments, and an additional $44 billion were identified in 2021. The total of these newly documented additional loan commitments over the past five years is equivalent to more than 17% of the total outstanding public and publicly guaranteed debt stock in 2021.

 
PRESS RELEASE NO: 2023/035/DEC

 

Madagascar: $220 Million to Improve Basic Water and Sanitation Services and Supply

ANTANANARIVO, June 17, 2022—The Government of Madagascar and the World Bank signed the recently approved $220 million National Water Project. The project seeks to increase access to water services in the Greater Antananarivo area and selected secondary towns, and to improve the performance of the water and energy utility (JIRAMA).

Continue reading

IDA: Stepping Up

Development Policy Financing (DPF) Retrospective 2021 Share your views

In the busy streets of Male, the capital of Maldives, Aminath Waheed picks up passengers, blazing a trail as the city’s only female taxi driver. In the hills of Nepal, 30-year-old Madhukala Adhikari works

The 2021 Development Policy Financing Retrospective reviews one of the World Bank’s three financing instruments – non-earmarked budget financing that supports policy and institutional reforms to help clients achieve sustainable growth and poverty reduction. This Retrospective presents key takeaways on trends and performance of DPFs and their role in supporting development priorities. The analysis is focused on DPFs committed between FY16 and FY21. The World Bank systematically distills lessons from DPF Retrospectives as part of an ongoing effort to learn from implementation. This is the fifth DPF Retrospective since the DPF Operational Policy (OP 8.60) was introduced in August 2004.

Continue reading

COVID-19 vaccines: from rejection to shortage, how Côte d’Ivoire became a model for managing vaccine hesitancy

STORY HIGHLIGHTS A man being vaccinated against COVID-19 at the vaccination cente

  • In February 2021, Côte d’Ivoire’s efforts to vaccinate its population in order to save lives and stem the spread of the coronavirus were being stymied by a wave of misinformation and a low level of public acceptance of the vaccine
  • The government embarked on a nationwide awareness-raising campaign, deploying mobile clinics and enlisting the support of influencers and religious and community leaders
  • This strategy paid off for the country, which succeeded in increasing the number of people vaccinated by tenfold, from just 2,000 to over 20,000 per day in the following weeks

Continue reading

What is driving COVID-19 vaccine hesitancy in Sub-Saharan Africa?

As African countries accelerate the deployment of COVID-19 (coronavirus) vaccines, the issue of vaccine hesitancy looms. Globally, there has been a rise in general vaccine hesitancy but especially towards COVID-19 vaccines. In Africa, hesitancy must be viewed in the context of significant vaccine shortage; hesitancy does not explain fully the low vaccination rates in Africa. The slow vaccine rollout on the continent is  due to supply constraints, structural issues, and logistical barriers. 

Continue reading

Remarks by World Bank Group President David Malpass to the Summit of the Heads of State of the Central African Economic and Monetary Community

Your Excellencies, Presidents, Distinguished Guests, Ladies and Gentlemen,World Bank building

I am pleased to participate in today’s Summit, which is taking place at a critical juncture for the Central African Economic and Monetary Community (CEMAC). I join with you in expressing my condolences on the death of President Deby to his son and the Chadian people. 

Continue reading

Livelihoods of Kenyan households bear the brunt of the COVID-19 pandemic

The number of COVID-19 (coronavirus) cases has exceeded 180 million worldwide and is still rising, with the economic downturn pushing 88 to 115 million people into extreme poverty in 2020, reversing the gains in global poverty reduction for the first time in a generation.  

Continue reading

Indigenous Peoples’ resilience: Supporting solutions from within

When COVID-19 hit, Indigenous peoples feared for the lives of their elders and the survival of shutterstock_709568200their cultures. Despite lockdowns, there seemed to be a surge in territorial invasions, contributing to the ensuing spread of the virus in their remote communities. Many were without water, sanitation and days away from the closest health clinics. Indigenous leaders called for help to mobilize food, water, soap, PPE, thermometers, and tests. Surprisingly, some of the most desperate stories were coming from Indigenous communities that, prior to the pandemic, had in many cases fared better economically, given their links with tourism, external markets, and informal urban employment. Relief efforts were also difficult. The rollout of emergency response programs often indirectly excluded Indigenous Peoples through eligibility requirements, such as electricity bills, and delivery mechanisms, such as urban grocery stores.

Continue reading

What it will take for our children to remember COVID-19 as a turning point

The world has come a long way since Edward Jenner injected a 13-year-old boy with the relatively less severe cowpox virus in 1796, producing a single blister, and then with actual smallpox, producing no disease. In doing so, he provided scientific evidence that vaccination with a mild form of a disease can save people’s lives, paving the way for a striking advance in medicine.  

From that pivotal moment over two hundred years ago, human health has improved considerably. Hundreds of millions of children are immunized today against a variety of diseases from smallpox to polio that used to cause widespread death and disability. By 1979, smallpox, a disease which killed 30% of those it infected, was declared eradicated. And polio is now endemic in only three countries. 

A country’s capacity to deliver vaccines saves children’s lives 

WHO-UNICEF data since 1980 shows progress in child immunization in low-income countries such as Mozambique. For example, only 25% of children had received all three doses of the polio vaccine (POL3) in 1985. With mass immunization, Mozambique reported its last wild poliovirus case in 1993. Immunization with MCV2 (two doses of measles-containing vaccine) has increased sharply in recent years, from 36% when it was introduced in 2016 to 85% in 2019, with the support of Gavi. 

Strengthening health systems to provide vaccines efficiently has saved many lives . Immunization gains in Mozambique have contributed to the reduction in child mortality from 266 deaths per 1,000 live births in 1980 to 74 in 2019. Immunization also has broader benefits for society including better student attendance and learning in school. That’s why we do not hesitate to get our children immunized. 

The COVID-19 vaccines are critical to keep adults alive and healthy 

Today, our greatest challenge is to restart economies and prevent adult deaths and illness from COVID-19 (coronavirus). But can we take 20, 30 or 40 years—or even five years—to achieve the required level of COVID-19 vaccination in our countries? How long can we wait to get to herd immunity, a scenario in which enough people are vaccinated to stop the spread of the disease even if some aren’t vaccinated? 

As I wrote earlier, hundreds of thousands of people are being pushed into poverty in Mozambique because of this crisis. Delaying vaccine rollout will be catastrophic for many, with variants contributing to a spike in cases . The latest evidence shows that a more contagious Delta strain of the virus is rapidly becoming dominant in Mozambique as the country enters its third wave, with over 100 deaths in the first 10 days of the month of July, more than the total deaths occurred during the months of May and June combined.   

As African governments are trying hard to increase the supply of vaccines coming in, the World Bank has joined the effort. To that end, we have recently approved a $100 million grant in support of Mozambique’s efforts to expand its current COVID-19 vaccination campaign. The funds are being utilized to acquire, manage, and deploy COVID-19 vaccines. This will enable the purchase of approximately seven million doses of COVID-19 vaccines, the single largest contribution for Mozambique’s vaccination efforts thus far.  

However, we will have to do more to ensure that people want to take the vaccines. All the vaccines are effective in preventing death and severe forms of the disease in the population. Data shows that if infected, fully vaccinated people have a lower viral load than unvaccinated people and are less likely to develop severe forms of the disease or die from Covid-19.  Increasing vaccine literacy is critical, and everyone with any sphere of influence, small or big, can do more to spread accurate information. The vaccines will work to save lives and reopen society only if enough people take them, and if countries can deliver them efficiently.  

Despite decades of effort, there are still weaknesses seen even in routine immunization. As Cassocera et al noted in their report on forty years of immunization in Mozambique, national immunization coverage remains below 90%, and Zambézia, Nampula, and Tete provinces have continuously reported low coverage. In some, such as Cabo Delgado, there have been inconsistencies over time.  

What needs to be done to gear up for COVID-19 vaccine deployment 

We need to learn from the lessons of 40 years. In deploying the COVID-19 vaccines, we need to look at what causes vaccination delays and fix what’s within our control . Even as global supply issues persist, we have to tackle domestic issues around vaccines. It’s not just about finding the money to procure enough doses—an investment that will yield rich returns for the economy—but also about deployment.  

A lot needs to be done quickly, from identifying cold chain gaps and closing them, to reducing the rate of vaccine wastage, ensuring adequate distribution of vaccines and related supplies to health facilities, training health workers, and opening effective channels of communication with citizens to ensure that both shots are taken on time in cases where it is a two-dose vaccine. 

While it may look like we are ready on paper, the process of vaccine delivery can suffer multiple roadblocks. The diagram below shows the various aspects of vaccine management that countries have to quickly strengthen. The World Bank and other development partners are helping countries gear up.

Source: WHO
Source: WHO

 

We also know that many countries are experiencing further waves of COVID-19 and that variants are a cause for concern. In addition to vaccination, health systems need to be prepared with hospital beds, oxygen and other supplies, equipment, and know-how on how to tackle cases that require urgent medical attention. We cannot afford the loss of lives and livelihoods that unpreparedness will result in. 

While the pandemic is an event of terrible proportions, this generation of children and teenagers should be able to look back on it later as a point after which public health really changed for the better on a historic scale. We have a good shot now at making the world a much safer place for our children.