According to the World Bank, the 26 poorest countries are in the worst financial condition since 2006

By David Lawder

WASHINGTON (Reuters) -The world’s 26 poorest countries, home to 40% of the poorest people, have more debt than at any time since 2006 and are increasingly vulnerable to natural disasters and other shocks, a new World Bank report shows. Sunday.

The report shows that these economies are poorer on average today than they were on the eve of the COVID-19 pandemic, even as the rest of the world has largely recovered from COVID and resumed its growth trajectory.

The report, published a week before the annual meetings of the World Bank and the International Monetary Fund in Washington, confirms a major setback in efforts to eradicate extreme poverty and underlines the World Bank’s efforts this year to raise $100 billion to replenish its financing fund for the world’s poorest. countries, the International Development Association (IDA).

The 26 poorest economies surveyed, which have an annual per capita income of less than $1,145, are increasingly dependent on IDA subsidies and near-zero interest loans as market financing has largely dried up, the World Bank said. Their average debt ratio of 72% is at an 18-year high and half the group is in or at high risk of debt problems.

Most of the countries in the study are in sub-Saharan Africa, from Ethiopia to Chad and Congo, but the list also includes Afghanistan and Yemen.

Two-thirds of the 26 poorest countries are involved in armed conflict or struggle to maintain order due to institutional and social fragility, which hinders foreign investment and almost all exports, exposing them to frequent boom-and-bust cycles , the report said.

“At a time when much of the world was simply pulling away from the poorest countries, the IDA was their lifeline,” Indermit Gill, chief economist at the World Bank, said in a statement. “Over the past five years, the country has poured most of its financial resources into the 26 low-income economies, helping them stay afloat despite the historic setbacks they have suffered.”

IDA is normally supplemented every three years with contributions from countries that own World Bank shares. In 2021, it raised a record $93 billion and World Bank President Ajay Banga aims to surpass that with more than $100 billion in commitments by December 6.

Natural disasters have also taken a greater toll on these countries over the past decade. Between 2011 and 2023, natural disasters were associated with average annual losses of 2% of GDP, five times the average among lower middle-income countries, indicating the need for much higher investment, the World Bank said.

The report also recommends that these economies, which have large informal sectors that operate outside their tax systems, do more to help themselves. This includes improving tax collection by simplifying taxpayer registration and tax administration and improving the efficiency of government spending.

(Reporting by David Lawder; Editing by Andrea Ricci and Jacqueline Wong)