Low- and middle-income countries need better sources of investment to boost economic growth and address their development needs, according to the World Bank (WB).
In its latest International Debt Statistics 2020, WB said total external debt burdens among low- and middle-income countries have risen to $7.8 trillion in 2018.
The report showed excluding debt stocks in top 10 borrowing countries, external debt rose 4 percent. The Philippines debt stock reached $78.824 billion in 2018.
“To grow faster, many developing countries need more investment that meets their development goals,” World Bank Group President David Malpass said in a news statement. “Debt transparency should extend to all forms of government commitments, both explicit and implicit. Transparency is a critical part of attracting more investment and building an efficient allocation of capital, and these are essential in our work to improve development outcomes.”
Compared to other Southeast Asian countries included in the report, in terms debt stock growth, the Philippines posted a growth of 5.97 percent in 2018.
This is higher than the growth of the external debt stock of Indonesia at 5.628 percent and Vietnam, 3.848 percent.
However, it remains slower than the global average of 11.94 percent, as well as the 17.89 percent posted by Cambodia and 7.398 percent, posted by Thailand.
The report stated that the 10 largest borrowers are Argentina, Brazil, China, India, Indonesia, Mexico, the Russian Federation, South Africa, Thailand and Turkey.
“Debt stocks were driven up by a 15-percent jump in China, fueled by investor appetite for renminbi-denominated assets,” the World Bank said in the same statement.
The report also showed that net debt inflows to low- and middle-income countries from multilateral creditors surged 86 percent, principally due to the International Monetary Fund’s support for Argentina.
Excluding that loan, net inflows from multilateral creditors to other low- and middle-income countries were unchanged from the previous year.
Lending from non-Paris Club creditors to countries eligible to borrow from the WB’s International Development Association (IDA), its fund for the poorest countries, slowed.
The share of new commitments from non-Paris Club bilateral creditors fell to 17 percent (a continued decline from 43 percent in 2010) while the share held by Paris Club bilateral creditors remained steady at 12 percent.
“Although on average the external debt burden of low- and middle-income countries was moderate, several countries have been on a deteriorating debt trajectory since 2009, the report indicates,” the WB said.
“The share of low- and middle-income countries with debt-to-GNI ratios below 30 percent has shrunk to 25 percent, down from 42 percent 10 years ago. Similarly, the share of countries with high debt-to-export ratios has climbed,” it added.
Bond issuance by low- and middle-income countries—a primary source of external financing for some countries—fell 26 percent to $302 billion in 2018 amid heightened global uncertainty, tighter capital markets, and credit ratings downgrades.
However, Sub-Saharan countries excluding South Africa issued a record-high $17 billion in bonds. Issues in 2018 were characterized by longer maturities and all were oversubscribed.
Net financial flows to low- and middle-income countries—including both debt and equity—slipped 19 percent in 2018 to $1 trillion.
Excluding China, which accounts for half of net debt flows and 43 percent of net equity flows, net financial flows to low- and middle-income countries tumbled 28 percent.