The debt of the 26 poorest countries has reached an 18-year high, making them increasingly vulnerable to natural disasters and other shocks.
This is stated in a new report by the World Bank, Reuters reports.
Most of the study’s countries are located in sub-Saharan Africa, from Ethiopia to Chad and Congo, but Afghanistan and Yemen are also on the list.
These countries, home to 40% of the world’s poorest people, are more in debt than ever since 2006. They are now poorer than before the coronavirus pandemic, even though the rest of the world has recovered mainly from COVID-19 and resumed its growth trajectory.
According to the World Bank, the 26 poorest economies surveyed increasingly depend on International Development Association (IDA) grants and loans with near-zero interest rates as market financing has largely dried up. Half of the countries in the group are either in debt distress or at high risk of debt distress.
Two-thirds of the 26 poorest countries are in armed conflict or have difficulty maintaining order due to institutional and social instability that discourages foreign investment. Almost all these countries export commodities, exposing them to frequent up-and-down cycles.
Improving tax collection, simplifying taxpayer registration, and increasing the efficiency of public spending could help these economies cope with domestic problems, the World Bank notes.