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The debt of the worldʼs 26 poorest countries has reached an 18-year high

Author:
Oleksandra Opanasenko
Date:

The debt of the 26 poorest countries has reached an 18-year high, leaving them increasingly vulnerable to natural disasters and other shocks.

This is stated in a new World Bank report, Reuters reports.

Most of the countries in the study are located in sub-Saharan Africa, from Ethiopia to Chad and Congo, but Afghanistan and Yemen also made the list.

These countries, home to 40% of the worldʼs poorest people, have more debt than at any time since 2006. They are now poorer than before the start of the coronavirus pandemic, even though the rest of the world has largely recovered from COVID-19 and resumed its growth trajectory.

According to the World Bank, the 26 poorest economies surveyed are increasingly dependent on International Development Association (IDA) grants and near-zero-interest loans as market-based financing has largely dried up. Half of the countries of the group are either in a state of debt crisis or are prone to a high risk of its occurrence.

Two-thirds of the 26 poorest countries are either in armed conflict or struggling to maintain order due to institutional and social instability that discourages foreign investment. Almost all of these countries export raw materials, which exposes them to frequent cycles of booms and busts.

Improving tax collection, simplifying taxpayer registration and increasing the efficiency of public spending can help these economies deal with domestic challenges, the World Bank says.

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