The World Bank has revealed that Nigeria secured the highest amount of fresh loans from the institution in 2022, receiving a substantial $2.9 billion. Tanzania closely followed, obtaining $2.7 billion during the same period, as indicated in the World Bank’s International Debt Report for 2023.
The report emphasized the debt challenges facing developing nations and cautioned that the surge in global interest rates puts the world’s poorest countries at risk of debt crises. Against the backdrop of the largest increase in global interest rates in four decades, developing countries spent a staggering $443.5 billion on servicing their external public and publicly guaranteed debt in 2022.
In a statement, the World Bank highlighted the impact of rising borrowing costs, diverting crucial resources away from essential sectors such as education, health, and the environment. The report revealed a 5% increase in debt-service payments for all developing countries compared to the previous year, with the 75 countries eligible for support from the World Bank’s International Development Association (IDA) paying a record $88.9 billion in debt-servicing costs in 2022.
The report predicted a significant rise, up to 39%, in overall debt-servicing costs for the 24 poorest countries in 2023 and 2024. The World Bank expressed concern about the vulnerability of all developing nations to debt, noting that stronger US dollar values are exacerbating their challenges, making debt payments more expensive.
Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President, highlighted the urgency for coordinated action to address the current situation. Gill emphasized the need for more transparency, better debt sustainability tools, and swifter restructuring arrangements to avoid a potential global debt crisis and mitigate the impact on essential public services.
As global debt levels rise and high-interest rates persist, the World Bank underscores the importance of immediate and collaborative measures to prevent countries from facing a difficult choice between servicing their public debts and investing in critical areas like public health, education, and infrastructure. The report warns of the risk of entering another lost decade if swift and coordinated action is not taken by debtor governments, private and official creditors, and multilateral financial institutions.
