Johannesburg – A World Bank report last month indicated that the poorest countries eligible to borrow from the World Bank’s International Development Association (IDA) now spend over a 10th of their export revenues to service their long-term public and publicly guaranteed external debt – the highest proportion since 2000.
The International Debt Report highlighted 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 totalled $9 trillion (R154.7 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 are already in distress,” the report said.
The report found that at the end of 2021, IDA-eligible countries’ debt-service payments on long-term public and publicly guaranteed external debt totalled $46.2 billion –the 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% to more than $62bn, 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,” it said.
The World Bank Group president David Malpass said the debt crisis facing developing countries has intensified.
“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,” he warned.
The report said that over the past decade, the composition of debt owed by IDA countries had 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% from 2010,” the World Bank report said.
Senior vice-president and chief economist of the World Bank Group Indermit Gil said poor debt transparency is the reason so many countries sleepwalk into a debt crisis.
“Complete, transparent debt data improves debt management. It makes debt sustainability analyses more reliable. And it makes debt restructuring 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,” said Gil.
According to the report, over the past five years, the International Debt Statistics database has identified and added $631bn of previously unreported loan commitments, and an additional $44bn 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,” the report said.
In November, the World Bank Group board of executive directors approved South Africa’s request for a $497 million project to decommission and repurpose the Komati coal-fired power plant, using renewables and batteries.
The Star