Poorest countries in worst financial shape since 2006, World Bank says

According to the World Bank, the 26 poorest nations in the world are now more indebted than they have ever been since 2006 and are becoming more prone to shocks and natural disasters.

The poorest economies are worse off today than they were before the COVID-19 pandemic, even though the rest of the world has largely recovered, the Washington, DC-based lender said in a report released on Sunday.

Per capita income fell an average of 14 percent between 2020 and 2024 due to COVID-19 and subsequent overlapping crises, according to the report.

According to the World Bank, countries will require additional annual investments equivalent to 8% of the country’s gross domestic product (GDP) through 2030, which is twice the average annual investment of the previous ten years.

But despite the need for greater assistance, net official development assistance as a share of GDP has plummeted, falling to a 21-year low of 7 percent in 2022, the report said.

“At a time when much of the world simply backed away from the poorest countries, IDA]International Development Association] has been their main lifeline”, said Indermit Gill, the World Bank Group’s chief economist and senior vice president for development economics.

“Over the past five years, it has poured most of its financial resources into the 26 low-income economies, keeping them afloat through the historic setbacks they suffered. IDA has worked to improve healthcare, provided safe drinking water, and provided employment to many children. Low-income nations will need to increase investment to a rate unheard of if they want to emerge from a state of chronic emergency and accomplish crucial development goals.

Additionally, the report found that low-income nations are significantly more vulnerable to natural disasters than other developing nations.

Between 2011 and 2023, natural disasters inflicted average annual losses of 2 percent of GDP – five times the average losses in lower-middle-income countries, the World Bank said.

Low-income countries’ costs, the report claims, are also five times higher than those for climate change, accounting for 3.5% of GDP annually.

Lower-income nations could help themselves, but they also needed assistance from richer economies, according to Ayhan Kose, the World Bank’s deputy chief economist and director of the Prospects Group.

By reducing the need for taxpayer registration, tax collection, and administration, they can expand their tax base. Additionally, Kose noted that they have room to improve how efficiently public spending is spent.