Debt crisis weighs on 26 of the world's poorest countries

Afghanistan is one of the 26 poorest countries facing a severe financial crisis. (Photo: Reuters)

The latest World Bank report shows that many countries are poorer than they were before the COVID-19 pandemic broke out, while most other countries have gradually recovered and grown again.

Released a week before the annual meeting of the World Bank and the International Monetary Fund (IMF) in Washington, DC, the report assessed this as a “major setback” for the international community’s efforts to reduce poverty, while affirming the WB’s role and efforts in supporting these countries through the International Development Association (IDA).

According to the World Bank, the 26 poorest economies , with annual per capita income below $1,145, are increasingly reliant on IDA grants and near-zero interest loans as market funding has dried up. Their average debt-to-GDP ratio is 72 percent, the highest in 18 years, and half of them are in debt distress or at high risk of it.

According to the report, more than half of the world’s 26 poorest countries are facing armed conflict or instability. This, combined with institutional weaknesses, reduces their ability to attract foreign investment and leaves them over-reliant on exports and highly vulnerable to fluctuations in global markets.

In a context where much of the world has turned a blind eye to the poorest countries, IDA has acted as a “lifeline,” said Mr. Indermit Gill, Chief Economist of the World Bank. According to Mr. Indermit Gill, over the past five years, IDA has poured most of its financial resources into the world’s 26 poorest economies, helping them overcome unprecedented difficulties in history.

IDA is typically replenished every three years with contributions from World Bank member countries. In 2021, IDA raised a record $93 billion. With this round of mobilization, World Bank President Ajay Banga aims to surpass that figure, with more than $100 billion in support for the fund by December 6 to support development projects in developing countries.

Over the past decade, natural disasters have taken a heavy toll on these countries. Between 2011 and 2023, the average annual loss from natural disasters amounted to 2% of GDP, five times higher than the average for lower-middle-income countries.

The report also recommends that these countries do more to help themselves. This includes improving revenue collection by simplifying tax registration and tax administration, as well as improving efficiency in public spending.

Most of the countries in the study are located in sub-Saharan Africa, from Ethiopia to Chad and Congo, with Afghanistan and Yemen also included./.

Source: https://dangcongsan.vn/the-gioi/tin-tuc/khung-hoang-no-de-nang-len-26-quoc-gia-ngheo-nhat-the-gioi-680591.html