Today’s News
A new World Bank report has revealed that the 26 poorest countries are experiencing their worst financial conditions since 2006, with rising debt levels and increasing vulnerability to natural disasters and other economic shocks.
These countries, home to 40% of the world’s poorest people, have seen their economies become even weaker than before the COVID-19 pandemic, while much of the world has recovered and returned to growth.
Image Source: Foreign Policy
The report, released just ahead of the World Bank and International Monetary Fund’s annual meetings, highlights a significant setback in efforts to eliminate extreme poverty. The World Bank is working to raise USD 100 billion for the International Development Association (IDA), its financing arm for the poorest nations, to help mitigate the crisis.
The 26 countries studied have annual per-capita incomes below USD 1,145, with an average debt-to-GDP ratio of 72%, marking an 18-year high. Half of these nations are either in or at risk of debt distress. Many rely heavily on IDA grants and low-interest loans as access to market financing has diminished.
Image Source: Vatican News
Image Source: Al Jazeera
Most of the affected countries are in sub-Saharan Africa, including Ethiopia, Chad, and Congo, along with Afghanistan and Yemen. Two-thirds of these nations are facing armed conflicts or institutional instability, deterring foreign investment. Additionally, nearly all of these economies depend on commodity exports, making them susceptible to boom-and-bust cycles.
“At a time when much of the world simply backed away from the poorest countries, IDA has been their lifeline,” said World Bank Chief Economist Indermit Gill. He noted that over the past five years, IDA has funneled most of its resources into these low-income economies to keep them afloat through major challenges.
IDA, typically replenished every three years through contributions from World Bank member nations, raised a record USD 93 billion in 2021. World Bank President Ajay Banga aims to surpass that figure with pledges exceeding USD 100 billion by December 6.
Natural disasters have also hit these nations hard, with annual GDP losses averaging 2% between 2011 and 2023—five times the average losses among lower-middle-income countries. The report emphasizes the need for higher investment to strengthen resilience.
The report also encourages these countries to help themselves by improving tax collection, simplifying taxpayer registration, and increasing the efficiency of public spending to better address their financial challenges.
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