INDERMIT GILL and M. AYHAN KOSE
They are home to a quarter of humanity – 1.9 billion people. They possess prized natural resources, including one-fifth of the world’s copper and gold reserves, as well as many of the rare metals essential for the transition to clean energy. Their working-age populations are set to expand for the next five decades amid demographic decline nearly everywhere else. Yet a historic reversal is underway among the world’s 75 countries eligible for grants and low-interest loans from the World Bank’s International Development Association.
For the first time this century, the income gap relative to the wealthiest economies is widening in roughly half of IDA countries. And while these countries are midway through what could be a lost decade, the rest of the world is largely averting its gaze. IDA countries have an extreme-poverty rate eight times higher than the global average. They account for 70% of all extreme poverty, and they are home to 90% of people facing hunger or malnutrition. Many of their national governments, meanwhile, are paralyzed, and half are either in debt distress or at high risk of it.
The flow of foreign capital has largely dried up for IDA countries. In 2022, for the first time in 16 years, private creditors took more in principal repayments than they put in via loan disbursements to IDA governments and government-guaranteed entities. Financing from foreign governments dwindled to an 11-year low. The remaining lifeline has been multilateral development banks, especially the World Bank, which provided more than half of the $26 billion in loans that IDA governments received from multilateral creditors in 2022.
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