International Debt Report 2024:
World Bank’s “International Debt Report 2024” highlights a worsening debt crisis for developing nations, with 2023 marking the highest debt servicing levels in two decades, driven by rising interest rates and economic challenges.
- Also, earlier in June 2024, a UNCTAD report, “A World of Debt 2024: A Growing Burden to Global Prosperity”, highlighted a severe global debt crisis impacting the world.
Key Findings of the International Debt Report, 2024:
- The total external debt of Low- and Middle-Income countries (Developing or LMICs) reached a record USD 8.8 trillion by the end of 2023, marking an 8% increase since 2020.
- External debt for the International Development Association (IDA)-eligible countries rose by nearly 18%, reaching USD 1.1 trillion.
- IDA, established in 1960,is a World Bank Group institution providing concessional loans and grants to the world’s poorest nations with low income and poor creditworthiness.
- LMICs incurred a record USD 1.4 trillion in debt servicing costs (principal plus interest payments) in 2023, with interest payments increasing by 33% to USD 406 billion, placing immense pressure on national budgets.
- The sharp rise in interest payments has curtailed investments in vital sectors like health, education, and environmental sustainability, exacerbating developmental challenges.
- In 2023, interest rates on loans from official creditors doubled to over 4%, while rates from private creditors rose to 6%, the highest level in 15 years.
- This surge in interest rates significantly increased the financial burden on developing countries, exacerbating their debt servicing challenges.
- As global credit conditions worsened, private creditors cut lending to IDA nations, leading to USD 13 billion more in debt servicing than new loans.
- In contrast, multilateral lenders, like the World Bank, supported these economies by providing USD 51 billion more than they collected in debt payments.
- IDA-eligible countries faced severe financial strain in 2023, paying USD 96.2 billion in debt servicing, including USD 34.6 billion in record-high interest costs- 4 times higher than in 2014.
- On average, nearly 6% of their export earnings go to interest payments, with some allocating up to 38%.
