The world’s 26 poorest economies—home to about 40 percent of all people who live on less than $2.15 a day—are deeper in debt than at any time since 2006 and increasingly vulnerable to natural disasters and other shocks, new analysis from the World Bank shows. Yet international aid as a share of their GDP has dwindled to a two-decade low, forcing many to obtain financing on punishing terms.
“At a time when much of the world simply backed away from the poorest countries, IDA 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 supported job creation and the education of children, worked to improve healthcare, and brought electricity and safe drinking water to large numbers of people. But if they are to rise out of a state of chronic emergency and meet key development goals, low-income economies will need to accelerate investment to a pace without precedent.”
“There is much that low-income economies can—and must—do for themselves,” said Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group.
“They can broaden their tax base by simplifying taxpayer registration and tax collection and administration. They also have plenty of room to improve the efficiency of public spending. But these economies also need stronger help from abroad—both in the form of greater international cooperation on trade and investment and in the form of much larger support for IDA, which can work with the private sector to mobilize additional resources and help facilitate structural reforms. IDA, in short, is a vital development partner for these countries—because of its successful track record of delivery, its affordable financing options, its deep expertise in development, and its sound policy advice.”
The 26 low-income economies today enjoy significant potential to boost growth at home and contribute to broader prosperity and peace as well: their natural resources are ample, and their working-age populations are growing. Yet they also face a cluster of challenges that are more severe than anywhere else.
Two-thirds of them are either in conflict or have difficulty maintaining order because of institutional and social fragility. Nearly all are commodity-exporting countries, subject to repeated boom-and-bust cycles driven by the whims of commodity markets.
