INTERNATIONAL DEBT REPORT 2024

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ISBN (paper): 978-1-4648-2148-6

ISBN (electronic): 978-1-4648-2149-3

DOI: 10.1596/978-1-4648-2148-6

Cover photo: © Dominic Chavez / World Bank. Further permission required for reuse. Cover design: Parul Agarwal / World Bank and Bill Pragluski / Critical Stages, LLC.

Library of Congress Control Number: 2024922727

Boxes

1.1 External Debt Data: Concepts, Sources, and Coverage 5

1.2 Understanding Bilateral Currency Swap Lines 7

1.3 IMF and World Bank Efforts to Assist with Crises 12

1.4 Debt Resolutions in Low- and Middle-Income Countries 17

1.5 World Bank Income and Lending Classifications Used in International Debt Report 2024 20

FIGURES

1.1 Creditor Composition of External Debt Stock in Lowand Middle-Income Countries, 2013–23 5

1.2 External Debt Stock of Lowand Middle-Income Countries, 2013–23 9

1.3 Creditor Composition of Low- and Middle-Income Countries’ (excluding China) Long-Term Public and Publicly Guaranteed External Debt, 2013–23 10

1.4 GNI Growth versus New World Bank Commitments as a Share of GNI, Low- and Middle-Income Countries, 1971–2023 11

1.5 Creditor Composition of IDA-Eligible Countries’ Long-Term Public and Publicly Guaranteed External Debt during Crises, 2006–23 15

1.6 External Debt-to-GNI Ratios for Low- and Middle-Income Countries (excluding China) and IDA-Eligible Countries, 2013–23 17

B1.4.1 Evolution of the Risk of External Debt Distress 18

1.6 Allocation of the International Monetary Fund’s Special Drawing Rights in 2023 25 1.7 Debt-for-Climate Swaps 34 1.8 Government Expenditures and External Debt Service in Developing Countries 44

B1.5.1 Number of Low- and MiddleIncome Countries Covered in International Debt Report 2024, by FY2025 Income and Lending Group 21

1.7 Variable Interest Rates and Interest Payments on Long-Term Debt of Low- and Middle-Income Countries (excluding China), by Creditor Type, 2020–23 23

1.8 Average Terms on New External Debt Commitments for Low- and Middle-Income Countries (excluding China), by Creditor Type, 2013–23 24

B1.6.1 SDR Allocations as a Share of International Reserves, by Region, 2023 26

1.9 Interest Payments on Public and Publicly Guaranteed Debt of Low- and Middle-Income Countries, by Region and Creditor Type, 2013–23 26

1.10 IDA-Eligible Countries’ Interest Payments on External Debt, by Creditor Type, 2013–23 27

1.11 Average Terms of Commitments of External Public and Publicly Guaranteed Debt to IDA-Eligible Countries, by Creditor Type, Average 2013–23 28

1.12 Net Debt Inflows in Lowand Middle-Income Countries, by Maturity, 2013–23 29

1.13 Long-Term External Debt Flows to Low- and Middle-Income Countries (excluding China), by Borrower Type, 2021–23 32

1.14 Bond Flows to Low- and Middle-Income Countries (excluding China), by Borrower Type, 2022–23 34

1.15 Net Flows to IDA-Eligible Countries, by Region and Creditor Type, 2023 38

1.16 Net Equity Inflows and External Debt Flows to Low- and Middle-Income Countries, 2013–23 39

1.17 Long-Term Net Transfers on External Debt in Low-and Middle-Income Countries (excluding China), by Debtor Type, 2013–23 41

1.18 Long-Term Net Transfers on Public and Publicly Guaranteed External Debt in Low- and Middle-Income Countries (excluding China), by Creditor Type, 2013–23 42

1.19 Debt Flows on Public and Publicly Guaranteed Debt in IDA-Eligible Countries, by Creditor Type, 2021–23 43

1.20 Net Transfers on Public and Publicly Guaranteed Debt in IDA-Eligible Countries, by Creditor Type, 2021–23 44

B1.8.1 Government Expenditures and External Debt Service Comparison, 2018–23 46 2.1 Percent Change in Gross Domestic Product, 2021–26 50 2.2 Interest Payments on Total External Debt as a Share of GNI, 2013–23 53

2.3 Composition of Government Revenues as a Share of GDP, 2010s vs. 2020s 55

3.1 Public Debt Disclosure by IDA-Eligible Countries, Access and Coverage, 2020 vs. 2023 59

3.2 Reporting Timetable for Debtor Reporting System Countries, 2019–23 60

TABLES

1.1 External Debt Stock of Lowand Middle-Income Countries, 2013–23 4

1.2 Net Debt Inflows to IDA-Eligible Countries, 2013–23 36

Foreword

It was a bold idea, boosted by a snappy slogan: “billions to trillions.” A decade ago, in an era when private capital was gushing into developing economies, governments and development institutions figured it was exactly what was needed to turbocharge progress on poverty reduction and other development goals. “The good news is that, globally, there are ample savings, amounting to US$17 trillion, and liquidity is at historical highs,” read a key World Bank strategy document of the time.

That proved to be a fantasy. Since 2022, foreign private creditors have extracted nearly US$141 billion more in debt service payments from public sector borrowers in developing economies than they disbursed in new financing. As this report documents, that withdrawal has upended the financing landscape for development. For two years in a row now, the external creditors of developing economies have been pulling out more than they have been putting in—with one striking exception. The World Bank and other multilateral institutions pumped in nearly US$85 billion more in 2022 and 2023 than they collected in debt service payments.

That has thrust some multilateral institutions into a role they were never designed to play—as lenders of last resort, deploying scarce long-term development finance to compensate for the exit of other creditors. Last year, multilateral institutions accounted for about 20 percent of the long-term external debt stock of developing economies, five points higher than in 2019. The World Bank’s International Development Association (IDA) now accounts for nearly half of the development aid going from multilateral institutions to the 26 poorest countries. In 2023, the World Bank accounted for fully a third of the overall net debt inflows going into IDA-eligible countries—US$16.7 billion, more than three times the volume a decade ago.

That reflects a broken financing system. Capital—both public and private—is essential for development. Long-term progress will depend to an important degree on restarting the capital flows that most developing countries enjoyed in the first decade of this century. But the risk-reward balance cannot be allowed to remain as lopsided as it is today, with multilateral institutions and government creditors bearing nearly all the risk and private creditors reaping nearly all the rewards.

When global interest rates skyrocketed in 2022 and 2023 and debt distress rose in the poorest countries, the World Bank followed its usual practice. It shifted from providing low-interest loans to providing grants to countries at high risk of distress. It increased its overall financing for these countries, typically over terms ranging from 30 to 50 years. But private creditors headed for the exits, more than fully compensated by high interest rates for the investment risks they had taken. In the absence of a predictable global system for restructuring debt, most countries facing distress opted to tough it out rather than default and risk being cut off indefinitely from global capital markets. In some cases, new financing arriving from the World Bank promptly went out to pay off private creditors.

In 2023, developing countries spent a record US$1.4 trillion just to service their debt. That amounted to nearly 4 percent of their gross national income. Ballooning interest payments accounted for most of the increase in overall debtservice payments. Principal repayments remained stable at about US$951 billion, but interest payments surged by more than a third to about US$406 billion.

The result, for many developing countries, has been a devastating diversion of resources away from areas critical for long-term growth and development such as health and education. The squeeze on the poorest and most vulnerable countries—those eligible to borrow from IDA—has been especially fierce. Their interest payments on external debt have quadrupled since 2013, hitting an all-time high of US$34.6 billion in 2023.

On average, interest payments now amount to nearly 6 percent of the export earnings of IDA-eligible countries—a level that has not been seen since 1999. For some countries, the percentages range from 10 to as much as 38. No wonder that more than half of IDA-eligible countries are either in debt distress or at high risk of it. No wonder that private creditors have been retreating even as multilateral financing increases.

These facts imply a metastasizing solvency crisis that continues to be misdiagnosed as a liquidity problem in many of the poorest countries. It is easy to kick the can down the road, to provide these countries just enough financing to help them meet their immediate repayment obligations. But that simply extends their purgatory. These countries will need to grow at a faster clip if they are to shrink their debt burdens—and they will need much more investment if growth is to accelerate. Neither is likely given the size of their debt burdens: their ability to repay will never be restored.

It’s time to face the reality: the poorest countries facing debt distress need debt relief if they are to have a shot at lasting prosperity. A twenty-first century global system is needed to ensure fair play in lending to all developing economies.

Sovereign borrowers deserve at least some of the protections that are routinely afforded to debt-strapped businesses and individuals under national bankruptcy laws. Private creditors that make risky, high-interest loans to poor countries ought to bear a fair share of the cost when the bet goes bad.

In an era of great international mistrust, it will be a struggle to establish these precepts. But without them, all major development goals will remain in peril— perhaps as much of a fantasy as “billions to trillions.”

Indermit S. Gill Senior Vice President and Chief Economist

The World Bank Group