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The debt of developing countries has more than doubled in ten years, announces the World Bank

2022-12-06T17:15:19.106Z


Until now largely in the hands of member countries of the Paris Club (about twenty countries including the G7 and Russia), this debt of 9000 billion dollars is now mainly in the hands of the private sector (61%).


The debt of developing countries has more than doubled over the past decade to reach 9 trillion dollars in 2021, the World Bank (WB) estimated on Tuesday, stressing that the risk of seeing them fall into crisis has increased.

According to its annual debt report, around 60% of the poorest countries are on the verge of or have already fallen into a debt crisis, particularly under the effect of the depreciation of their currency against the dollar on the foreign exchange market, when their debt is often denominated in greenbacks, but also because of the rise in interest rates since the beginning of the year.

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The debt crisis facing developing countries has intensified.

(...) Many of its countries face financial risk and political instability, with millions of people falling into poverty

if nothing is done to help them, said World Bank President David Malpass, quoted in the statement.

Additional difficulty for the poorest countries, they now spend more than 10% of their annual income from exports to repay their debt, a level at its highest since the beginning of the 2000s. With large sums to pay: over 2022, countries eligible to borrow from the World Bank's International Development Association (IDA) will have to repay more than $62 billion, a significant year-on-year increase.

Two-thirds of this sum will be destined for China.

Because at the same time, the composition of debt holders in developing countries has changed profoundly, recalls the WB.

One majority owned by private actors

Until now largely in the hands of member countries of the Paris Club (about twenty countries including the G7 and Russia), the latter is now primarily in the hands of the private sector (61%).

For the rest, several States that are not members of the Paris Club, first and foremost China, India and several Gulf countries, have seen their share increase, with China sometimes alone accounting for almost half of borrowings from another state.

The multiplication of players increases the borrowing costs of the countries concerned and adds to the difficulties of restructuring their debt before it becomes unmanageable, as was the case recently for Sri Lanka, with often dramatic consequences for the countries concerned.

Another problem: the information relating to the debt, in particular between States,

Read alsoState debt burden increases to 39.5 billion in 2022

"

This lack of transparency is one of the reasons why countries fall into crisis

," said WB chief economist Indermit Gill.

Transparency makes it possible to be more effective in restructuring debt so that States can quickly regain financial stability and growth

”.

Source: lefigaro

All news articles on 2022-12-06

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