The World Bank’s latest report reveals that the world’s 26 poorest countries are facing their worst economic conditions since 2006, with deepening debt levels and increased vulnerability to natural disasters. These nations, which are home to 40% of the world’s most impoverished people, find themselves in a more precarious position than at any time in the past 18 years. According to the report, these economies are struggling to recover from the impacts of the COVID-19 pandemic, even as the global economy has largely resumed its growth trajectory.
The report, released ahead of the World Bank and International Monetary Fund’s (IMF) annual meetings in Washington, emphasizes the severe setbacks in the global fight against extreme poverty. It also highlights the World Bank’s efforts to raise $100 billion for the International Development Association (IDA), its financing arm dedicated to the world’s poorest countries. This push for replenishment aims to provide critical support to countries that have been heavily impacted by the economic disruptions of recent years, especially those that are unable to access market financing due to their deteriorating financial conditions.
The 26 countries identified in the report have annual per-capita incomes of less than $1,145 and have become increasingly reliant on IDA grants and near-zero interest rate loans to sustain their economies. With market-based financing options dwindling, these nations have seen their debt-to-GDP ratio reach an average of 72%, marking an 18-year high. Furthermore, half of the countries in this group are classified as either being in debt distress or facing a high risk of debt distress.
A significant number of these countries are located in sub-Saharan Africa, including Ethiopia, Chad, and Congo. The list also extends beyond Africa, encompassing countries like Afghanistan and Yemen. The economic challenges in these regions are compounded by ongoing armed conflicts and institutional instability, which hinder foreign investment and economic development. Most of these economies are heavily dependent on exporting commodities, making them susceptible to volatile market cycles, where periods of growth are often followed by severe downturns.
World Bank Chief Economist Indermit Gill underscored the critical role of the IDA in supporting these struggling economies during difficult times. “At a time when much of the world simply backed away from the poorest countries, IDA has been their lifeline,” Gill stated. “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.” This support has been vital for many of these countries, providing the financial stability necessary to navigate through a range of challenges, including economic downturns and social instability.
The IDA, traditionally replenished every three years through contributions from World Bank shareholding countries, raised a record $93 billion in 2021. With the goal of exceeding that figure, World Bank President Ajay Banga is targeting over $100 billion in pledges by December 6. This ambitious effort is seen as critical to ensuring that these vulnerable nations receive the assistance they need to withstand current economic pressures.
Natural disasters have further exacerbated the challenges facing these countries. From 2011 to 2023, the average annual losses due to natural disasters amounted to 2% of GDP for these low-income nations—five times the average losses experienced by lower-middle-income countries. This vulnerability highlights the urgent need for greater investment in climate resilience and disaster preparedness to help mitigate the economic impacts of such events. The report suggests that without increased investment, these countries will continue to struggle with the long-term effects of climate change, further hindering their development prospects.
In addition to external aid, the World Bank report emphasizes the need for these economies to take internal steps to improve their fiscal health. With large informal sectors operating outside formal tax systems, the report calls for enhanced efforts in tax collection, including simplified registration processes and more efficient tax administration. By boosting tax revenue, these countries can potentially increase their ability to invest in critical infrastructure and social services, laying the groundwork for more sustainable economic growth.
The report’s findings serve as a stark reminder of the enduring economic challenges faced by the world’s poorest nations, particularly in the aftermath of the COVID-19 pandemic. While much of the global economy has begun to recover, these 26 countries remain trapped in a cycle of debt, economic instability, and vulnerability to external shocks. As the World Bank and IMF prepare for their upcoming meetings, the focus will be on finding ways to support these struggling economies and ensure that the progress made in poverty reduction over the past few decades is not undone. With the right mix of international support and domestic reforms, there remains hope that these nations can gradually regain their economic footing and work towards a more stable and prosperous future.