The World Bank has reported a significant historical reversal in development trends, as half of the world’s 75 poorest nations are now experiencing a widening income gap compared to the wealthiest economies. Per capita income growth in these countries has lagged behind the richest nations over the past five years. Ayhan Kose, Deputy Chief Economist for the World Bank, stated, “For the first time, we see there is no convergence. They’re getting poorer.”
The report highlights that the 75 countries eligible for grants and zero-interest loans from the World Bank’s International Development Association (IDA) risk a lost decade of development without ambitious policy shifts and substantial international aid. Growth in many IDA countries had already begun to decline before the COVID-19 pandemic, and it is expected to be just 3.4% in 2020-2024, the weakest half-decade of growth since the early 1990s.
More than half of all IDA countries are in Sub-Saharan Africa, with 14 in East Asia and eight in Latin America and the Caribbean. Thirty-one of these nations have per capita incomes of less than $1,315 a year, including the Democratic Republic of Congo, Afghanistan, and Haiti. One in three IDA countries is poorer now than before the pandemic, and IDA countries account for 92% of the world’s population without access to a sufficient quantity of affordable, nutritious food. Over half of these countries are in debt distress, unable to service debt or at high risk of not being able to do so.
Despite their young populations, rich natural resources, and abundant solar-energy potential, private and government creditors have been withdrawing from these nations. U.S. Treasury Undersecretary Jay Shambaugh warned against this trend, urging China and other emerging official creditors not to curtail loans to low-income countries. Almost 40 countries experienced external public debt outflows in 2022, and the flows likely worsened in 2023.
To address this issue, the World Bank calls for ambitious policies to accelerate investment, including domestic efforts to strengthen fiscal, monetary, and financial policies, as well as structural reforms to improve education and increase domestic revenues. Significant financial support from the global community is also essential to make progress and lower the risk of protracted stagnation. The World Bank aims to secure a robust replenishment of IDA
