In the 1980s’, forgiving the public debt of developing nations was an important topic in every intergovernmental body. Nowadays, it’s even worse but nobody talks about it (very much).
On Wednesday, December 13th, the World Bank released its annual International Debt Report. Its findings are quite shocking: In 2022, developing countries faced a historic burden, paying a record $443.5 billion to service public debt due to a global surge in interest rates. This represents a 5% increase from the previous year, and the outlook is grim for the world’s poorest nations. The cost of servicing debt for these nations could spike by up to 39% in 2023 and 2024, raising concerns of a crisis. High interest rates and record debt levels are pushing many countries towards crisis, forcing them to choose between servicing debt and investing in essential areas like public health and education.
The severity is underscored by 18 sovereign defaults in the last three years across 10 developing countries, exceeding the total of the previous two decades. The World Bank identifies 28 countries eligible for aid as being at high risk of debt distress, with 11 already in distress. Global interest rate surges and a strong U.S. dollar have made debt servicing more expensive for indebted nations.
Multilateral banks, including the World Bank and IMF, have intensified efforts to help developing countries refinance debt as private financing options dwindle. In 2022, private creditors received $185 billion more in repayments than issued in loans in developing countries, prompting multilateral banks to provide $115 billion in low-cost financing.
