The IDR features external debt statistics and analysis for low- and middle-income countries (LMICs) that report to the World Bank's Debtor Reporting System (DRS).
Key highlights
- Rising External Debt: Total external debt of LMICs rose by 2.4% in 2023, reaching $8.8 trillion.
- Factors Driving Indebtedness
- High Interest Rates: Tight monetary policies in high-income countries pushed interest rates to a 20-year high.
- Bangladesh and India experienced over 90% increases in interest payments in 2023.
- Other Factors: Inflation, depreciating currencies, and global economic uncertainty due to armed conflicts and trade fragmentation.
- High Interest Rates: Tight monetary policies in high-income countries pushed interest rates to a 20-year high.
- Impact of rising debt: Budget strain impacted critical sectors like health, education, and environmental programs.
Way Ahead
To promote sustainable and inclusive debt solutions, the UN Trade and Development earlier proposed the following measures:
- Global Financial Reforms: Comprehensive reforms to prevent a widespread debt crisis and create an inclusive financial system.
- Mitigating Predatory Lending: Increase concessional financing and reduce information asymmetry (between lender and borrowers) and discourage exploitative lending practices.
- Crisis Resilience: Implement climate-resilient debt clauses and standstill rules to pause repayments during crises.
- Improved Restructuring Mechanisms: Establish automatic restructuring rules and a Global Debt Authority to guide and coordinate sovereign debt management.
