The risks and challenges that the World Bank sees among countries requesting loans

The risks and challenges that the World Bank sees among countries requesting loans

The spring meetings of the International Monetary Fund, IMF, and the World Bank began. On the first day, an alert was launched about the points that pose a challenge for countries seeking financing.

Firstly, there is the increase in poverty in those territories that want credit, as well as a slow level of GDP growth.

The International Development Association, which depends on the World Bank, found that, In 75 countries with the greatest exposure to being covered by IMF and WB credits, (including Colombia) there is home to a quarter of humanity, that is, 1.9 billion people..

“At a time when populations are aging almost everywhere else, the share of young workers in IDA-financed countries will increase through 2070, representing a huge potential demographic dividend,” says the report. study.

These countries also have a great wealth of natural resources and a high potential for solar energy generation.and have important reservoirs of mineral deposits that could be essential for the world to make the transition to clean energy.

The buts

For the World Bank, these territories that seek credit are experiencing a historical regression. Between 2020 and 2024, average per capita income in half of IDA-financed countries (the highest share since the beginning of this century) has grown more slowly than in rich economies. Thus, the income gap between these two groups of countries widens. One in three IDA client countries is poorer, on average, than it was before the start of the Covid-19 pandemic.

The extreme poverty rate is eight times the average in the rest of the world. “One in four people in IDA countries subsist on less than $2.15 a day. These countries currently represent 90% of all people suffering from hunger or malnutrition,” the World Bank found.

Half of these countries are in a situation of over-indebtedness or are at serious risk of suffering from it. Still, except for the World Bank Group and other multilateral development donors, foreign lenders (both private and government sector creditors) have turned away from them.

“The world cannot afford to turn its back on IDA countries,” said Indermit Gill, chief economist and senior vice president of the World Bank Group. “The well-being of these countries has always been fundamental to the prospect of long-term global prosperity. Three of the current economic powers (China, India and South Korea) were at one time IDA borrowers. All of them prospered in such a way that they were able to reduce extreme poverty and improve living standards. With help from abroad, the group of countries that today receive financing from IDA could also do so.”

More than half of all IDA countries (39 in total) are located in sub-Saharan Africa; 14 of them (mainly small island states) are in East Asia, and eight in Latin America and the Caribbean.

In South Asia, all countries except India receive IDA financing; 31 of the countries receiving IDA financing have per capita incomes of less than US$1,315 per year; 33 are fragile and conflict-affected states. Which represents a greater challenge to execute certain types of works and credit guarantees.