The COVID-19 pandemic brought unprecedented challenges to low- and middle-income countries. Even prior to the onset of the crisis, rising public debt levels and heightened debt vulnerabilities were already a concern in many countries. These vulnerabilities increased dramatically in 2020. The crisis drove up financing needs and thereby public borrowing, while weakening individual countries’ economic fundamentals and capacity to service and repay public debt. The risk now is that too many countries will emerge from the COVID-19 crisis with a large debt overhang that could take years to manage.
The external debt stock of low- and middle-income countries in 2020 rose, on average, 5.6 percent to $8.7 trillion. However, for many countries the increase was in double digits. The external debt stock of countries eligible for the G20 Debt Service Suspension Initiative (DSSI) rose, on average, 12 percent to $860 billion and in some of them by 20 percent or more. For most countries the rise in external indebtedness was not matched by the growth of Gross National Income (GNI) and exports.
A large-scale shift in the approach to debt transparency is needed to help countries assess and manage their external debt risks and work toward sustainable debt levels and terms. This is particularly urgent given the scheduled expiration of the DSSI at the end of 2021. The World Bank has long played a leading role in the compilation and dissemination of external debt statistics. International Debt Statistics, the World Bank’s flagship publication on external debt data, is the most important source of verifiable information on the external debt of low- and middle-income countries and offers a unique data set that can shape the solutions that will be needed in the coming years.
International Debt Statistics 2022 raises the bar on debt transparency. The 2020 dataset was expanded to provide more detailed and disaggregated data on external debt than ever before. The data now breaks down each borrowing country’s external debt stock into amounts owed to each official and private creditor, the currency composition, and the financial terms of extended loans. In addition, for DSSI-eligible countries, the dataset includes the debt service that was deferred during 2020 by each bilateral creditor; and the projected monthly debt-service payments that will be owed on this debt.
Importantly, the borrower classification now presents the central bank as a separate borrower entity. Beginning with 2020, the data increasingly reflects external borrowing by state-owned enterprises. Most 2020 data are actual, not estimated, transactions.
The transparency of data on debt must evolve to keep pace with an ever-changing creditor landscape and with new and increasingly complex debt-like instruments and data requirements. We are working hard to be able to capture all debt instruments, including external borrowing by state-owned enterprises, central bank deposits, and currency swaps. We are also collecting information on loan guarantees and collateral arrangements.
Reliable and comprehensive debt data is a cornerstone of good development outcomes. Borrowing allows governments and growing private sectors to mobilize the resources they need to invest in innovation, health systems, education, and infrastructure and build durable economic recoveries. Debt transparency invites new investment and helps safeguard long-term sustainability. The World Bank is committed to working with governments and partners to achieve that outcome—by continually improving debt data coverage, quality, timeliness, and transparency.