Ndubuisi Francis in Abuja
In the face of the biggest surge in global interest rates in four decades, Nigeria and other developing countries spent a record $443.5 billion to service their external public and publicly-guaranteed debt in 2022, the World Bank’s latest International Debt Report has shown.
The World Bank had in April revealed that Nigeria used 96.3 per cent of revenue generated in 2022 to service debt, saying that the constant fiscal deficit has aggravated the nation’s public debt stock.
According to the new International Debt Report, which showed that poorest countries face the risk of debt crises as borrowing costs surge, the increase in costs shifted scarce resources away from critical needs such as health, education, and the environment.
Debt-service payments—which include principal and interest—increased by 5 per cent over the previous year for all developing countries, the document stated.
The report revealed that the 75 countries eligible to borrow from the World Bank’s International Development Association (IDA)—which supports the poorest countries—paid a record $88.9 billion in debt-servicing costs in 2022.
Over the past decade, interest payments by these countries have quadrupled, to an all-time high of $23.6 billion in 2022, it added.
Overall debt-servicing costs for the 24 poorest countries are expected to balloon in 2023 and 2024—by as much as 39 per cent, the report found.
“Record debt levels and high interest rates have set many countries on a path to crisis,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President.
‘‘Every quarter that interest rates stay high results in more developing countries becoming distressed—and facing the difficult choice of servicing their public debts or investing in public health, education, and infrastructure.
“The situation warrants quick and coordinated action by debtor governments, private and official creditors, and multilateral financial institutions—more transparency, better debt sustainability tools, and swifter restructuring arrangements. The alternative is another lost decade,’’ he added.
Surging interest rates have intensified debt vulnerabilities in all developing countries, it noted.
“In the past three years alone, there have been 18 sovereign defaults in 10 developing countries—greater than the number recorded in all of the previous two decades. Today, about 60 per cent of low-income countries are at high risk of debt distress or already in it.
“Interest payments consume an increasingly large share of low-income countries’ export,” the report said.
The latest International Debt Report marks the publication’s 50th anniversary. It highlights key insights from the World Bank’s International Debt Statistics database—the most comprehensive and transparent source of external debt data of developing countries.
The new edition also features an expanded analytical framework, one that goes beyond the latest data to examine near-term outlook for debt as well. It also includes an overview of the Bank’s debt-related activities and an analysis of emerging trends in debt management and transparency.
“Knowing what a country owes and to whom is essential for better debt management and sustainability.
“The first step in avoiding a crisis is having a clear picture of the challenge. And when problems arise, clear data can guide debt restructuring efforts to get a country back on track towards economic stability and growth.
“Debt transparency is the key to sustainable public borrowing and accountable, rules-based lending practices which are so vital to ending poverty on a liveable planet,” said the Chief Statistician of the World Bank and Director of the World Bank’s Development Data Group, Haishan Fu.
The report noted that IDA-eligible countries had spent the last decade, adding to their debt at a pace that exceeds their economic growth—a red flag for their prospects in the coming years.
In 2022, the combined external debt stock of IDA-eligible countries hit a record $1.1 trillion—more than double the 2012 level.
From 2012 through 2022, IDA-eligible countries increased their external debt by 134 per cent, outstripping the 53 per cent increase they achieved in their Gross National Income (GNI).
