On October 13, a World Bank report highlighted that the 26 poorest countries, which are home to 40% of the world's most impoverished individuals, are facing unprecedented levels of debt, the highest since 2006. These nations are increasingly susceptible to natural disasters and economic shocks.
The report indicates that these economies are, on average, poorer now than they were prior to the COVID-19 pandemic, contrasting sharply with the recovery seen in other global regions. This revelation comes just ahead of the World Bank and International Monetary Fund's annual meetings in Washington.
With per-capita incomes below $1,145, these countries are heavily dependent on grants and low-interest loans from the International Development Association (IDA), as traditional market financing has diminished. The average debt-to-GDP ratio for these nations stands at 72%, marking an 18-year peak, with half of them either in debt distress or at high risk of it.
Additionally, two-thirds of these countries are experiencing armed conflicts or significant social instability, which hampers foreign investment. Their reliance on commodity exports makes them vulnerable to volatile market conditions.
World Bank chief economist Indermit Gill noted that while many have turned away from these nations, the IDA has been crucial in providing support. The IDA, which typically receives replenishments every three years, aims to raise over $100 billion in contributions by December 6, surpassing the record $93 billion raised in 2021.
The report also underscores the increasing impact of natural disasters on these economies, which have suffered average annual losses of 2% of GDP from such events between 2011 and 2023—five times higher than the losses in lower-middle-income countries. It calls for improved tax collection and public spending efficiency to bolster these vulnerable economies.