Rising Debt Among the World's Poorest Countries
A recent report by the World Bank reveals that the 26 poorest countries in the world are facing unprecedented levels of debt, reaching the highest point in 18 years. This alarming trend affects approximately 40% of the global population living on less than $2.15 a day. Among these nations, four Arab countries—Sudan, Somalia, Syria, and Yemen—are included, highlighting a significant regional concern.
The report indicates that these countries are not only struggling with high debt but are also increasingly vulnerable to natural disasters and economic shocks. The situation has been exacerbated by a decline in international aid, which has dropped to its lowest share of GDP in two decades. Consequently, many of these nations are forced to secure loans under challenging conditions, further entrenching their economic hardships.
Impact of the COVID-19 Pandemic
The World Bank's findings suggest that the economic conditions of these nations are poorer now than before the COVID-19 pandemic. While many countries around the globe have rebounded from the pandemic's effects, the poorest nations have not experienced the same recovery. The report was published just ahead of the International Monetary Fund and World Bank's annual meetings in Washington, emphasizing the urgent need for global financial support.
This report underscores a major setback in the fight against extreme poverty, as the World Bank aims to raise $100 billion this year to support the International Development Association (IDA), which provides crucial funding to the poorest countries. The average debt-to-GDP ratio for these nations has skyrocketed to 72%, indicating a severe financial crisis.
The Broader Implications
The majority of the countries listed in the report are situated in sub-Saharan Africa, but the list also includes Afghanistan and Yemen, reflecting a broader global challenge. Two-thirds of these countries are grappling with armed conflicts or instability, which significantly hampers foreign investment and trade. Natural disasters have also inflicted substantial losses over the past decade, further complicating recovery efforts.
The World Bank typically replenishes the IDA every three years with contributions from its member countries, and in 2021, it raised a record $93 billion. However, the current financial landscape indicates that more support is urgently needed to help these nations recover and improve their economic situations.
