Poorest states spend over 10% of export returns on debt: World Bank
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The world's poorest countries are currently undergoing a rough period, paying 10% of their export revenues in debt.
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In this photo taken Thursday, Oct. 19, 2017, a man walks through a greenhouse at a learning center where sustainable agriculture techniques such as drought-resistant crops and tree planting are taught (AP Photo/Adelle Kalakouti)
The poorest countries in the world are now spending more tan than 10% of their export revenues to pay off their external debt, the highest proportion in over two decades, the World Bank said on Tuesday.
"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 World Bank's statement said.
It noted that this was "the highest proportion since 2000, shortly after the Heavily Indebted Poor Countries (HIPC) initiative was established," it added, citing the World Bank’s new International Debt Report.
The report touches on the increasing debt-related risks for all developing economies.
"At the end of 2021, the external debt of these economies totaled $9 trillion, more than double the amount a decade ago," the statement noted. "During the same period, the total external debt of IDA countries, meanwhile, nearly tripled to $1 trillion."
Furthermore, the report underlined how interest rate hikes and slowing global growth were jeopardizing various countries and putting them at risk of getting plunged into debt crises.
Currently, it added, about 60% of of the world's poorest countries were already at high risk of debt distress - if they were not already in distress.
The World Bank then warned of a heightened risk of a worldwide recession next year as the world undergoes one of the "most international synchronous" periods of monetary and fiscal policy tightening over the past 50 years.
"Currency depreciations have made matters worse for many developing countries whose debt is denominated in US dollars. The 2021 debt-to-GNI [gross national income] improvement, as a result, is likely temporary," it added.
Finally, the World Bank, also known as the International Bank for Reconstruction and Development (IBRD), underlined the need for nations to improve their transparency when it comes to the debts they have been plunged into.
The interest rate hikes come at a time when the United States is raising its interest rates and as the entirety of Europe is trying to recalibrate its economy after the damages it sustained in the wake of the sanctions imposed on Russia over the Ukraine war.
The benchmark lending rate in the US increased last month by three-quarters of a percentage point to 3.75–4.0%, which is the highest level since January 2008. But Fed Chair Jerome Powell issued a warning, saying that policymakers are not yet prepared to stop their initiatives.
As the housing market sharply cooled amid higher borrowing costs, the key inflation measures demonstrated the increase in prices and the tight labor market, with job openings on the rise and private hiring accelerating in October.
The Fed's actions, according to White House spokeswoman Karine Jean-Pierre, are "part of our transition" to "stable and steady growth with lower inflation."
Figures from Eurostat data showed last week that the Eurozone annual inflation rate fell for the first time in the past 17 months in November with a staggering decrease of 10%.
Inflation in the Eurozone began surging in early 2021, nearly a year before the war in Ukraine. It was further boosted by soaring energy and food bills triggered by the EU's own reckless decision to sanction Russia.
In October, inflation was recorded at 10.6 percent, up from 9.9 percent in September.
It is unlikely however that November figures would change Europe's Central Bank decision to stop raising interest rates.
