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Borrowing by low and middle-income economies more than triples in 2017

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Borrowing by low and middle-income economies from both the external official and private creditors surged to US $607 billion in 2017 from US $181 billion the previous year, the highest level in three years. External debt stocks also saw a rise of 10 per cent in 2017 to $7.1 trillion, according to International Debt Statistics 2019.

Net financial inflows – including debt and equity – jumped to US$1.11 trillion, the highest level in four years, the report indicates.

External debt stocks of low and middle-income countries rose to US $7.1 trillion last year, a 10 per cent increase from 2016. The ratio of debt-to-gross national income (GNI) on average was steady at 25 per cent and the ratio of debt-to-export earnings declined to 102 per cent. Nevertheless, 11 low and middle-income countries, including Lebanon, Mongolia and Mozambique, have debt-to-GNI ratios of over 100 per cent.

The database measures stocks and flows of debt borrowed from creditors outside the country and other financial flows for 121 low and middle-income countries. Sources underlying the data include loan-by-loan data on public and publicly guaranteed external debt, aggregate data on non-guaranteed private sector external debt, balance of payments statistics, official aid flows, and short-term external debt.

“Measurement is the first step to improving debt management and confronting issues of debt sustainability,” said World Bank Development Economics Data Group Director Haishan Fu. “These statistics are a unique resource and provide a vital building block for policymakers and experts across the globe. The World Bank is committed to making data accessible to respond to user needs and inform the debt management challenges countries face.”

Regionally, Sub-Saharan Africa countries added almost 16 per cent more external debt, South Asian economies added to external debt stocks by 11 per cent, and economies of the Middle East and North Africa increased external debt stocks by close to 12 per cent, while external debt stocks rose by near 3 per cent in the countries of Eastern Europe and Central Asia and In Latin America and the Caribbean.

Net public and publicly guaranteed bond issuance accounted for 85 per cent of net long-term debt inflows from all official and private creditors combined. New bond issuance jumped to a record high of US $355 billion in in 2017 from US $196 billion in 2016.

Equity – as opposed to debt – inflows to low and middle-income countries were down slightly to US $511 billion in 2017, and foreign direct investment inflows shrank for the second consecutive year, falling 3 percent to US $454 billion. However, foreign direct investment inflows to the poorest countries – those eligible for financing from the International Development Association – rose 1 per cent.

New commitments to IDA-eligible countries from private creditors rose to US $9.2 billion in 2017, more than three times the amount in 2016, The fact that over one third of these loans were contracted by IDA-only countries assessed to be at high risk of debt distress underscores rising concerns about debt sustainability, given that loans from private creditors typically have bullet repayments or relatively short maturities and carry market interest rates.

International Debt Statistics 2019 provides a wealth of statistics and analysis on the external debt stocks and financial flows (debt and equity) of the world’s economies in 2017. It offers more than 200 time-series indicators from 1970 to 2017 for most reporting countries.

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