Debt of poorest countries at record $9.4tn high, World Bank data shows
Developing countries’ debt reached a record $9.4tn last year, with the poorest facing the highest interest rates since the late 1980s, World Bank data shows.
The rise in developing country debt of 5.5% last year was the fastest in four years, driven by a rapid increase in private sector lending.
The World Bank’s chief statistician, Haishan Fu, said access to international finance has improved, but the price has not.
Low- and middle-income countries are borrowing more, paying more, and, in many cases, leaving less for long-term development.
On average, the poorest countries faced an average interest rate of 8.2% on new borrowing, the highest since the late 1980s.
The Bank highlighted recent borrowing by Laos at 11.5%, the Republic of Congo at 13.88%, and Kenya at 9.2%.
Analysing the connection between a high debt burden and domestic spending, the World Bank found global shocks had more impact on the availability of food in heavily indebted countries.
Food and nutrition security provides a concrete example of these interactions, illustrating how debt burdens may be closely associated with a decline in the affordability of a healthy diet during periods of global stress.
UK plans for a new debt drive
The UK government is preparing to champion a new drive on debt as part of its presidency of the G20 next year, a move the prime minister, Andy Burnham, has linked to confronting the legacy of slavery.
Burnham has appointed the former Labour prime minister Gordon Brown to examine the feasibility of changes to the global debt regime in the run-up to the UK’s G20 presidency.
The UK foreign secretary, Ed Miliband, set out plans last month for a new deal for heavily indebted countries in a speech at the IMF annual meetings in Bangkok.
The deal is likely to include proposals to mobilise the balance sheets of the World Bank and other multilateral development banks to buy back outstanding debt.
However, the situation is more complex than in the run-up to the Gleneagles summit in 2005 because today’s creditors tend to be private-sector bondholders, not governments.
There have been growing demands for changes to the framework for international debt, including from African Union heads of state and under the G20 chairs of Brazil and South Africa.
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