São Paulo – The world’s 26 poorest economies are deeper in debt than at any time since 2006, according to a report released by the World Bank on Oct. 13. These countries are home to about 40% of all people who live on less than USD 2.15 a day.
The survey indicates that these nations are increasingly vulnerable to natural disasters and other shocks. It also shows that international aid to them has dwindled to a two-decade low, forcing many to obtain financing on punitive terms.
The World Bank finds that these economies are poorer today on average than they were on the eve of COVID-19, even though the rest of the world has largely recovered. Nearly half of these economies are either in debt distress or at high risk of it.
Low-income economies’ dried-up ability to attract low-cost financing has left the World Bank’s International Development Association (IDA) as their single-largest source of low-cost financing from abroad. IDA provides grants and near-zero-interest-rate loans to 77 of the world’s most vulnerable economies
“At a time when much of the world simply backed away from the poorest countries, IDA has been their main lifeline,” Indermit Gill, the World Bank Group’s chief economist and senior vice president for development economics, was quoted as saying in the press release. Two-thirds of these countries are either in conflict or have difficulty maintaining order because of institutional and social fragility.
Poorest economies’ potential
Although the COVID-19 pandemic sharply increased spending needs in low-income economies, causing primary deficits to triple, the World Bank states that these economies enjoy significant potential to boost growth at home and contribute to broader prosperity and peace as well, as their natural resources are ample, and their working-age populations are growing.
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Translated by Guilherme Miranda
