The World Bank released its International Debt Report on Dec. 3, exposing another weak point in the global economy: Third World debt. In the introduction they explain that the developing world never actually recovered from the 2020-21 Covid shutdown before inflation struck on a global scale in 2024, and that the situation is now untenable.
Writes World Bank Group Senior Vice President and Chief Economist Indermit S. Gill in the Introduction to the 250-page report: “Between 2022 and 2024, about US$741 billion more flowed out of developing economies in debt repayments and interest than flowed into them in the form of new financing,” adding, “It was the largest debt-related outflow in more than 50 years….
“In 2024, the total external debt stock of low- and middle-income countries hit a new record: US$8.9 trillion, of which US$1.2 trillion—also a record—was owed by the 78 most vulnerable countries eligible to receive grants and low-cost loans from the World Bank’s International Development Association.
“Yet it’s no easier today for developing countries to stay clear of a debilitating debt trap than it was a decade ago,” Gill says; in fact, it’s worse. In the good old days of debt extraction, debt was controlled either by the World Bank or the International Monetary Fund. Today, however, he says that “private creditors—bond investors mostly— account for nearly 60% of the long-term public and publicly guaranteed debt of developing economies.” This has made the restructuring (debt forgiveness) process more complicated—"sluggish” in his terms—as victims are forced to deal with “millions of bondholders and a kaleidoscope of governments,” whose willingness to forgive the debt may vary widely.
“The time has come to stop tempting fate,” Gill warns readers—meaning shareholder-led debt financiers. His message is clear: The days when the World Bank and IMF can be counted on as a backstop to bondholder excesses are over. A blowout of the $8.9 trillion debt market is upon us.