WASHINGTON — The world’s poorest countries are facing a major setback in their efforts to eradicate extreme poverty, as revealed in a new report by the World Bank. This report, released just a week before the World Bank and International Monetary Fund’s annual meetings in Washington, paints a worrying picture of the current state of these economies.
According to the report, the 26 poorest countries in the world, home to 40% of the most impoverished people, are now more in debt than they have been in the past 15 years. This is a significant increase from 2006 and is placing these countries in a vulnerable position, particularly in the face of natural disasters and other shocks.
It is a concerning reality that these economies are even poorer today than they were before the COVID-19 pandemic, while the rest of the world has largely recovered and resumed its growth trajectory. This highlights the urgent need for action and support from the international community to address this issue and prevent further setbacks in the fight against extreme poverty.
The World Bank’s efforts to raise $100 billion to replenish its financing fund for the world’s poorest countries, the International Development Association (IDA), is a crucial step in the right direction. This funding will play a vital role in supporting these economies and helping them to recover from the devastating impacts of the pandemic.
The 26 poorest economies, which have an annual per-capita income of less than $1,145, are increasingly reliant on IDA grants and near-zero interest rate loans, as market financing has largely dried up. This highlights the urgent need for sustainable and accessible financing options for these countries, to enable them to continue their development efforts.
However, it’s not just economic struggles that these countries are facing. The report also highlights the challenges posed by armed conflicts and institutional and social fragility. These issues make it difficult for these countries to attract foreign investment and lead to frequent economic downturns. Furthermore, the reliance on exporting commodities leaves them exposed to the volatility of the global market.
The World Bank’s chief economist, Indermit Gill, stressed the importance of the IDA in supporting these economies, stating that “at a time when much of the world simply backed away from the poorest countries, IDA has been their lifeline.” This further emphasizes the need for continued support and investment in these countries to help them overcome these challenges.
While the IDA has been a crucial lifeline for these countries, the report also highlights the need for these economies to do more to help themselves. This includes improving tax collections by simplifying taxpayer registration and tax administration, as well as enhancing the efficiency of public spending. These efforts would not only generate much-needed revenue for these countries but also create a more stable and sustainable economic environment.
Another important factor that the report highlights is the impact of natural disasters on these economies. Over the past decade, natural disasters have caused an average annual loss of 2% of GDP in these countries, which is five times higher than the average among lower-middle-income countries. This further emphasizes the need for increased investment in disaster preparedness and resilience building in these vulnerable economies.
In conclusion, the World Bank’s report paints a concerning picture of the current state of the world’s poorest economies. However, it also highlights the potential for positive change through continued support and investment. With the replenishment of the IDA, we have an opportunity to make a real difference in the lives of the most impoverished people around the world. It is crucial for the international community to come together and pledge their support to ensure a brighter and more prosperous future for these 26 countries. Let us not underestimate the potential of these economies and instead, focus our efforts on helping them reach their full potential.
