By Ovunc Kutlu
ISTANBUL (AA) - The World Bank said Wednesday that developing countries paid a record $443.5 billion in 2022 to service their public debt due to the biggest increase in global interest rates in four decades.
"The increase in costs shifted scarce resources away from critical needs such as health, education and the environment," the institution said in a statement.
Debt-service payments, which include principal and interest, increased by 5% over the previous year for all developing countries.
The 75 countries that are eligible to borrow from the World Bank’s International Development Association, which supports the poorest countries, paid a record $88.9 billion in debt-servicing costs in 2022, it noted.
While interest payments by these countries have quadrupled over the last decade to reach an all-time high of $23.6 billion in 2022, overall debt-servicing costs for the 24 poorest countries are expected to surge in 2023 and 2024 by as much as 39%.
In the last three years alone, there have been 18 defaults in 10 developing countries, which is higher than the number recorded in all of the previous two decades. In addition, around 60% of low-income countries are at high risk of debt distress or already in it, said the World Bank.
"Record debt levels and high interest rates have set many countries on a path to crisis," said Indermit Gill, the World Bank Group's chief economist and senior vice president for development economics.
"The situation warrants quick and coordinated action by debtor governments, private and official creditors, and multilateral financial institutions—more transparency, better debt sustainability tools, and swifter restructuring arrangements. The alternative is another lost decade," he added.