World Bank’s Latest International Debt Report

December 15, 2023

Developing countries faced an unprecedented financial challenge in 2022, as they spent a staggering $443.5 billion to service their external public and publicly guaranteed debt. The World Bank’s latest International Debt Report reveals that these costs had far-reaching consequences, diverting vital resources from critical sectors such as health, education, and the environment.

Rising Debt-Service Payments

Debt-service payments, encompassing both principal and interest, saw a 5% increase across all developing countries compared to the previous year. Notably, the 75 countries eligible for support from the World Bank’s International Development Association set a record by paying $88.9 billion in debt-servicing costs. This surge in debt levels and interest rates is pushing many nations towards a looming crisis.

Escalating Interest Payments

Over the past decade, interest payments for these countries have quadrupled, reaching an unprecedented high of $23.6 billion in 2022. The report projects a worrisome trajectory, indicating that debt-servicing costs for the 24 poorest countries could surge by as much as 39% in 2023 and 2024.

Growing Debt Vulnerabilities

Interest payments now consume a significant portion of low-income countries’ exports, with more than a third of their external debt subject to variable interest rates. The report reveals that approximately 60% of low-income countries are at high risk of debt distress or are already grappling with it, raising concerns about the potential repercussions of any further rise in interest rates or a sharp drop in export earnings.

Increase in Sovereign Defaults

Surging interest rates have exacerbated debt vulnerabilities, leading to 18 sovereign defaults in the past three years alone across 10 developing countries. This marks a stark contrast to the number recorded in the previous two decades.

Dwindling Financing Options: A Troubling Trend

The report underscores the dwindling financing options for developing countries, with new external loan commitments dropping by 23% to $371 billion in 2022, the lowest level in a decade. Private creditors, in particular, received $185 billion more in principal repayments than they disbursed in loans, marking the first time since 2015 that they received more funds than they provided to developing countries.

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