Debt Stocks of Developing Countries Rose to $7.8 Trillion in 2018

Total external debt of low- and middle-income countries climbed 5.3 percent to $7.8 trillion last year, while net debt flows (gross disbursements minus principal payments) from external creditors tumbled 28 percent to $529 billion, the World Bank’s International Debt Statistics 2020 shows.

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 share of low- and middle-income countries with debt-to-GNI ratios below 30 percent has shrunk to 25 percent, down from 42 percent ten years ago. Similarly, the share of countries with high debt-to-export ratios has climbed.  

“To grow faster, many developing countries need more investment that meets their development goals,” World Bank Group President David Malpass said. “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.”

Debt stocks were driven up by a 15 percent jump in China, fueled by investor appetite for renminbi-denominated assets. Excluding the ten largest borrowers (Argentina, Brazil, China, India, Indonesia, Mexico, the Russian Federation, South Africa, Thailand, and Turkey), external debt stocks rose 4 percent. Sub-Saharan countries excluding South Africa saw debts stocks swell by 8 percent on average in 2018, and over half the countries in the region have seen external debt stocks double since 2009.

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 World Bank’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.

This edition of International Debt Statistics features for the first time a breakdown of public and publicly guaranteed debt — government and other public sector debt, as well as private debt that is government guaranteed. As a result, information is available not only about government debt but also the explicit contingent liabilities of governments.

Borrowing patterns and debt instruments have changed over time, and so has the depth and scope of International Debt Statistics,” said World Bank Development Economics Data Group Director Haishan Fu. “What has not changed is the core objective of the report: providing comprehensive, timely data on the external debt of low- and middle-income countries to support debt management and related policy decisions.”

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.