The international lending institution said that developing countries repaid their $1.4 trillion debt to the World Bank.
The World Bank reported that developing countries spent a record $1.4 trillion in 2023 to pay off their external debts, with interest costs reaching their highest level in 20 years, straining budgets for essential needs like health, education, and the environment.
The Bank’s latest International Debt Report shows that total interest payments on external debt from developing countries have risen to $406 billion, with the heaviest burden falling on the poorest countries.
Countries eligible for borrowing from the International Development Association (IDA) paid a record $96.2 billion in 2023.
While principal payments dropped by about 8% to $61.6 billion, interest costs rose to $34.6 billion in 2023, four times higher than a decade ago.
Global Debt Total
The World Bank reported that, on average, IDA-eligible countries spent 6% of their export earnings on external debt payments, a level not seen since 1999.
In some countries, payments can account for up to 38% of export earnings.
In a separate report, a banking trade group revealed that the global debt stock will increase by $12 trillion during the first three quarters of 2024, reaching a record level of nearly $323 trillion.
The Institute of International Finance also warned that, if government budget deficits are not controlled, sovereign debt could rise by a third by 2028, reaching $130 trillion, with an increased risk of default.
The Last Lifeline
The World Bank reported that by the end of 2023, the total external debt of all low- and middle-income countries increased by 8% compared to 2020, reaching a record high of $8.8 trillion.
The pressure on the poorest countries has forced them to turn to multilateral institutions like the World Bank and the International Monetary Fund.
According to the World Bank’s report, these institutions transferred $51 billion more than the debt payments they collected in 2022 and 2023.
World Bank Chief Economist Indermit Gill said, “Multilateral institutions have become a lifeline for poor economies trying to balance debt repayments with spending on health, education, and other key development priorities,” adding that these institutions were not designed to be a last resort.
