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Debt in Low-Income Countries : Evolution, Implications, and Remedies

Author

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  • Essl,Sebastian Michael
  • Kilic Celik,Sinem
  • Kirby,Patrick Alexander
  • Proite,Andre

Abstract

Debt vulnerabilities in low-income countries have increased substantially in recent years. Since 2013, median government debt has risen by about 20 percentage points of gross domestic product and increasingly comes from non-concessional and private sources. As a result, in most low-income countries, interest payments are absorbing an increasing proportion of government revenues. The majority of low-income countries would be hard hit by a sudden weakening in trade or global financial conditions given high levels of external debt, lack of fiscal space, low foreign currency reserves, and undiversified exports. A proactive effort to identify and reduce debt-related vulnerabilities is a priority for many low-income countries. Policy makers should focus on mobilizing domestic resources, improving debt transparency, and strengthening debt management practices. These efforts should be complemented by measures to strengthen fiscal frameworks, improve the efficiency of public expenditures and public investment management, and develop domestic financial systems.

Suggested Citation

  • Essl,Sebastian Michael & Kilic Celik,Sinem & Kirby,Patrick Alexander & Proite,Andre, 2019. "Debt in Low-Income Countries : Evolution, Implications, and Remedies," Policy Research Working Paper Series 8794, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8794
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    Cited by:

    1. Kaaresvirta, Juuso & Laakkonen, Helinä, 2021. "China as an international creditor," BOFIT Policy Briefs 5/2021, Bank of Finland Institute for Emerging Economies (BOFIT).

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