The World Bank warned in its latest report that the 26 poorest countries in the world, where 40% of the population most affected by this condition reside, face their highest level of debt since 2006 and are increasingly vulnerable to natural disasters and other disturbances.
The study found that, on average, these economies are poorer than before the COVID-19 pandemic, even though the rest of the world has largely managed to recover from its effects and resumed growth.
Published a week before the annual meetings of the World Bank and the International Monetary Fund (IMF) in Washington, the research highlights a significant setback in efforts to eradicate extreme poverty and highlights the WB’s intention to raise $100 billion this year to replenish its funding fund for the poorest countries, the International Development Association (IDA).
The detail of the WB document
The 26 economies analyzedwhich have an annual per capita income of less than $1,145, are increasingly reliant on IDA grants and loans at near-zero interest rates, as market financing has been significantly reduced. Their average debt-to-GDP ratio of 72% is the highest in 18 years, and half of these countries are facing difficulties or are at high risk of debt.
Furthermore, two thirds of them are affected by armed conflict or have difficulties maintaining order due to the institutional and social fragilitywhich limits foreign investment, and almost all depend on the export of raw materials, making them susceptible to volatile economic cycles.
Poverty Destitution
The report also suggests that these economies, which have large informal sectors outside their tax systems, must make efforts to strengthen their self-sufficiency.
Mariano Fuchila
Indermit Gillchief economist of the World Bank, said that “at a time when much of the world is moving away from the poorest countries, IDA has been its lifeline,” stressing that in the last five years it has channeled most of its resources towards these 26 low-income economies, helping them face historic challenges.
The IDA is usually renewed every three years with contributions from the World Bank’s shareholder countries, and in 2021 it raised a record $93 billion; Now, the president of the World Bank, Ajay Banga, seeks to exceed that figure with more than $100 billion in commitments before December 6.
Natural disasters have also had a strong impact on these countries in the last decade, generating average annual losses of 2% of GDP between 2011 and 2023, a figure five times higher than the average for lower-middle-income countries, which highlights the need to much larger investments.
The report also suggests that these economies, which have large informal sectors outside their tax systems, must make efforts to strengthen their self-sufficiency, improving tax collection, simplifying taxpayer registration and tax administration, and optimizing the efficiency of public spending. .
Source: Ambito