In 2023, developing countries disbursed a record $1.4 trillion to service their external debt, while their interest charges reached their highest level for 20 years.
These figures emerge from a new World Bank report recently published.
Entitled “International Debt Report”, the document reveals that interest payments around the world have jumped by almost a third to $406 billion, putting a strain on many countries’ budgets in crucial areas such as health, education and the environment.
Experts reveal that the poorest and most vulnerable countries were hardest hit by the financial crisis in 2023.
As the figures for the period under review show, these countries paid a record $96.2 billion in debt servicing.
Also, experts point out, although principal repayments fell by almost 8% to $61.6 billion, interest charges reached a record level of $34.6 billion in 2023, four times higher than 10 years ago.
On average, interest payments in IDA-eligible countries represent almost 6% of export earnings, a level not seen since 1999.
For some countries, payments reach 38% of export earnings,” says the document.
Faced with the tightening of credit measures, the World Bank and other multilateral institutions have taken on the role of “lifeline” for the poorest economies.
For example, since 2022, foreign private creditors have received almost $13 billion more in debt servicing from public sector borrowers in IDA-eligible economies than they have disbursed in new financing.
Over the same period, the Bank and other multilateral institutions injected nearly $51 billion more in 2022 and 2023 than they received in debt servicing. The World Bank accounted for a third of this sum, or $28.1 billion.
At the end of 2023, the total external debt of low- and middle-income countries reached a record $8.8 trillion, an 8% increase on 2020. This percentage increase was more than twice as high for IDA-eligible countries, whose total external debt reached $1,100 billion, an increase of almost 18%.
Flory musiswa