Poorest Nations Face Debt and Disaster since 2006: The World Bank

According to the World Bank, the world’s 26 poorest countries are deeper in debt than at any point since 2006. They are increasingly exposed to natural disasters and economic shocks.

These struggling economies are now worse off than they were before the COVID-19 pandemic. While the rest of the world has largely recovered, these nations continue to suffer, as highlighted in a recent report.

The report reveals that per capita income has plummeted by an average of 14 percent between 2020 and 2024, driven by the pandemic and a series of overlapping crises. This decline is alarming and indicative of deeper systemic issues.

To achieve critical development goals, these countries require an additional annual investment equal to 8 percent of their gross domestic product (GDP) through 2030. This is double the average investment seen over the past decade.

Despite this urgent need, net official development assistance as a share of GDP has drastically declined. It hit a 21-year low of just 7 percent in 2022. This is a shocking betrayal of the poorest nations at a critical moment.

Over the past five years, the International Development Association has poured resources into these low-income economies, helping them stay afloat amid unprecedented challenges.

While IDA has supported job creation, education, healthcare, and access to basic utilities, the reality remains grim. To escape chronic emergencies, these nations must dramatically increase investments like never before.

The report also points out that low-income economies face significantly higher risks from natural disasters. From 2011 to 2023, they experienced average annual losses equivalent to 2 percent of their GDP—five times the losses faced by lower-middle-income countries.

Adapting to climate change is equally daunting. For these nations, the cost is about 3.5 percent of GDP each year, making adaptation five times more expensive than in other developing regions.

Ayhan Kose, the World Bank’s deputy chief economist, stated that while these countries can take steps to help themselves, they urgently need assistance from wealthier nations.

He urged lower-income countries to broaden their tax base by simplifying taxpayer registration and improving public spending efficiency. Yet, these measures alone are insufficient without stronger support from abroad.

International cooperation on trade and investment is crucial, along with significantly larger support for IDA. This support can mobilize additional resources and facilitate essential structural reforms.