Annual International Debt Report (IDR) 2024

7 Dec 2024

Annual International Debt Report (IDR) 2024

Recently, World Bank Released Annual International Debt Report (IDR) 2024

About Annual International Debt Report

  • It provides detailed information on external debt for low- and middle-income countries

low- and middle-income countries: Criteria

The classification of countries is based on the Gross National Income (GNI) per capita.

  • Low-Income Countries : GNI per capita: $1,145 or less
  • Lower Middle-Income Countries: GNI per capita: Between $1,146 and $4,515
  • Upper Middle-Income Countries: GNI per capita: Between $4,516 and $14,005
  • High-Income Countries: GNI per capita: More than $14,005

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  • Key Contributions of the IDR
  • Data Insights: Tracks borrowing patterns and new lending methods.
  • Debt Relief Impact: Assesses the outcomes of initiatives to reduce debt burdens.
  • Transparency Promotion: Encourages accurate debt recording and reporting.

Key Findings of the International Debt Report 2024

The report highlights trends and developments in external debt for low- and middle-income countries (LMICs) over the past decade (2013–2023), with a focus on 2023.

International Debt Report

  • Trends in External Debt Stock (2013–2023)
    • The total external debt stock of LMICs grew by 2.4% in 2023, reaching US$8.8 trillion.
    • The increase in long-term debt was largely due to higher borrowing from multilateral creditors.
    • Trends in External Debt Flows (2013–2023)
      • Net debt flows (disbursements minus repayments) turned positive in 2023, totaling US$220.7 billion.
      • This was a significant recovery (fivefold increase) compared to 2022 but remained lower than the levels seen between 2017 and 2021.
    • Trends in Net Transfers on External Debt (2013–2023)
      • Higher interest payments negatively impacted net debt transfers.
      • Net debt transfers reflect the difference between the amounts borrowed (new disbursements) and the amounts repaid (interest and principal).

What is the debt-to-GNI ratio?

  • It is a metric that compares a nation’s total external debt to its gross national income. 
  • A high ratio shows a high level of external debt relative to its income. 

  • Debt Ratios and Debt Resolutions
    • The debt-to-GNI ratio for LMICs (excluding China) slightly decreased by 0.8 percentage points, standing at 34.4% in 2023.
    • This ratio has been on a declining trend since reaching a two-decade high of 41.8% in 2020.
  • International Debt ReportDebt Servicing Burdens (2013–2023)
    • LMICs faced record-high debt servicing costs of US$1.4 trillion in 2023 (principal and interest payments).
    • For LMICs excluding China, debt servicing costs increased by 19.7%, reaching US$971.1 billion—almost double the amount recorded a decade ago.
    • Role of Multilateral Lenders
      • Multilateral lenders, such as the World Bank, IMF, and regional development banks, became the primary source of financial support for LMICs during the pandemic and beyond.
      • Their support included emergency relief and balance-of-payments assistance.
      • Borrowing from private creditors fell due to:
        • Adverse market conditions.
        • Reduced investments in emerging markets.
        • A shift towards concessional loans from official creditors in IDA-eligible countries.
  • Growth in Debt Stock from Official Lenders
    • Long-term debt stock owed to the World Bank and IMF by LMICs has grown by 63.1% since the pandemic, compared to marginal growth in private lending.
    • LMICs (excluding China) owed US$421.8 billion to the World Bank’s lending arms in 2023, accounting for 34% of all multilateral creditors’ debt.
  • Rising Interest Rates and Costs
    • Interest rates on new loans increased significantly in 2023:
      • Official creditors: Rates rose by 2.1 percentage points to 4.09%.
      • Private creditors: Rates increased by 1.37 percentage points to 6.0%, the highest since 2008.

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What is external debt?

  • External debt is the money a country borrows from foreign sources like other governments, banks, or international organizations. It is divided into two types:
  • Short-term debt: Needs to be repaid in a year or less.
  • Long-term debt: Has a longer repayment period.
  • Main Features of External Debt
    • Types of External Debt:
      • Public Debt: Borrowed by the government.
      • Private Debt: Borrowed by private companies.
      • Multilateral Debt: Loans from organizations like the World Bank and IMF.
      • Bilateral Debt: Loans from one country to another.
      • Commercial Loans: Borrowed from banks or investors.
    • Why Countries Borrow:
      • To build roads, schools, and hospitals.
      • To manage financial crises.
      • To cover gaps in government budgets.
    • How Debt is Repaid:
      • Countries pay back the principal amount and interest.
      • Sometimes, they take new loans to repay old ones.

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