Developing countries have paid a record amount of 1,400 billion dollars (1,240 billion francs at current rates) to service their external debt in 2023. The World Bank points out, in a report published Tuesday, the very high interest rates students. 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 eligible for a loan from the International Development Association (IDA), the World Bank agency that lends to poorer countries.
High rates have pushed interest costs to their highest level in twenty years, says the World Bank, which says the rate paid on loans from official creditors has doubled to more than 4%. Rates applied by private creditors were even worse, reaching 6%, the highest in fifteen years.
“Money is flowing out of poor economies when it should be flowing in”
Although interest rates have started to fall in many advanced economies, including the United States, overall “they are expected to remain above the average that prevailed in the decade before the Covid-19 pandemic.” 19,” the World Bank said in the statement.
“With the exception of funds from the World Bank and other multilateral institutions, money is flowing out of poor economies when it should be flowing in,” said Indermit Gill, chief economist of the World Bank, quoted in the press release. . 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,” he added.
