Developing countries have dedicated $1.4 trillion in 2023 to repaying the interest on their debts alone. A historic level that has not been reached for 20 years, according to an alarming report from the World Bank.
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Among these countries, the poorest and most vulnerable » paid a record $96.2 billion to service their debt, including nearly $35 billion for interest costs alone, also a record. These countries are those eligible for a loan from the International Development Association (IDA), the agency of World Bank which lends to the poorest countries.
High rates have pushed interest costs to their highest level in 20 years, says the World Bank, which says the rate paid on loans from official creditors has doubled to more than 4%. Rates charged by private creditors were even worse, reaching 6%, the highest in 15 years.
Although interest rates have started to fall in many advanced economies, including UNITED STATESoverall, “iThey should remain above the average which prevailed during the decade preceding Covid-19 “, the World Bank said in the statement.
Developing countries strangled by debt repayment
There Mongolia itself faced with the problem, recalled this figure a few weeks ago: 40% of the world’s population today lives in a country which devotes more money to repaying the interest on its external debt than to health or education. In total, these interests represented $406 billion in 2023, a third more than 10 years ago, warns the World Bank.
The rise in interest rates spares no one, but it particularly affects the poorest countries, those in sub-Saharan Africa in particular. To repay an increasingly costly debt, these same countries find themselves forced to borrow. A vicious circle that closes like a noose on already fragile economies.
Faced with this high cost of servicing external debt, many developing countries borrowed more from multilateral institutions such as the World Bank, which further strained their finances. “ In heavily indebted poor countries, multilateral development banks are now playing the role of lender of last resort, a role for which they were not designed “, declared Indermit Gill, chief economist of the World Bank, quoted in the press release which concludes with a formula: “ money flows out of poor countries when it should flow there, this is a sign of a dysfunction of the financial system “.
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