World Bank says 26 poorest countries in worst financial shape since 2006

The world's 26 poorest countries, which are home to about 40% of the global population living in extreme poverty, are currently facing unprecedented levels of debt and heightened vulnerability to natural disasters, according to a new World Bank report. These nations, with per-capita incomes under $1,145, are experiencing their highest debt-to-GDP ratios since 2006 and are struggling more now than before the Covid-19 pandemic. Despite the global recovery, these economies have not bounced back and remain heavily reliant on International Development Association (IDA) support through grants and near-zero interest loans, as access to market financing has largely disappeared.

The report, released ahead of the World Bank and International Monetary Fund (IMF) annual meetings, emphasizes the growing financial challenges these countries face. Their debt-to-GDP ratio now averages 72%, with half of the nations either already in debt distress or at high risk of it. Contributing to this crisis are widespread armed conflicts or fragile political and social structures in two-thirds of these countries, which severely limit foreign investment and expose them to volatile global markets as many of them depend on commodity exports.

World Bank Chief Economist Indermit Gill highlighted the essential role of the IDA in supporting these nations, stating that IDA's financial resources have been a lifeline, particularly over the past five years as these countries grappled with severe setbacks. The World Bank is now looking to raise over $100 billion by December 6 to replenish IDA’s funds, exceeding the $93 billion raised in 2021.

Natural disasters have had an increasingly devastating impact on these countries, with average annual losses due to such events at 2% of GDP between 2011 and 2023—five times higher than in lower-middle-income countries. This underscores the need for much greater investment in disaster preparedness and recovery efforts.

The report also encourages these economies to take steps to improve their own fiscal systems. It recommends simplifying tax registration processes, enhancing tax administration, and improving the efficiency of public spending to better manage resources and stimulate growth.