The external debt stock of low- and middle-income countries combined increased 5.3% in 2020 to US $ 8.7 trillion, warned the report “Debt Statistics 2022”, presented in Washington, within the framework of the joint assembly of the organization and the International Monetary Fund (IMF).
Governments around the world responded to the Covid-19 pandemic with massive fiscal, monetary and financial stimulus packages, in order to address the health emergency, cushion the impact of the pandemic on the poor and vulnerable, and put countries in the road to recovery, all of which increased the debt burden, said a statement released in the US capital.
Even before the pandemic, many low- and middle-income countries were in a vulnerable position, with slowing economic growth and high public and external debt, the analysis indicated.
In this regard, he added, a comprehensive approach to debt management is needed “to help low- and middle-income countries assess and reduce risks and achieve sustainable debt levels.”
According to the Senior Vice President and Chief Economist of the World Bank Group, Carmen Reinhart, “Economies around the world face a daunting challenge due to high and rapidly increasing debt levels.”
The expert considered that “policymakers should prepare for the possibility of over-indebtedness when financial market conditions become less benign, particularly in emerging markets and developing economies.”
The deterioration in debt indicators, according to the World Bank, was generalized and affected countries in all regions: in the case of low- and middle-income countries, the increase in external indebtedness exceeded gross national income (GNI) and the export growth.
The external debt-to-GNI ratio of low- and middle-income countries (excluding China) increased to 42% in 2020, from 37% in 2019, while their debt-to-exports ratio increased to 154% in 2020, from 126 % in 2019, the WB report pointed out.
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