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Debt Report 2021 - Edition I Summary

About the Report

This is the first edition of the Debt Reports for 2021, published online at regular intervals. The reports aim to provide analyses of external and public debt trends in low- and middle-income countries, with a focus on regional and country-specific data. They are based on detailed loan-by-loan data from the World Bank Debtor Reporting System (DRS), as well as high-frequency databases like Quarterly External Debt Statistics (QEDS) and Quarterly Public Debt Statistics (PSDS). The reports also highlight ongoing initiatives to improve debt measurement and monitoring, fill data gaps, and enhance international dataset harmonization.

Core Content and Key Information

• 2019 Financial Flows: Net financial flows to low- and middle-income countries fell for the second consecutive year, totaling $0.9 billion, a 15% decline from 2018.
• Debt Composition: Long-term external debt grew at the fastest pace, rising 7% to $5.8 trillion, while short-term debt increased only marginally.
• Regional Divergence: The decline in net financial flows masked significant regional differences. China remained the largest recipient, accounting for 36% of net flows, down from 49% in 2018.
• Equity Inflows: Equity inflows outpaced debt inflows in most regions except Sub-Saharan Africa and the Middle East and North Africa, where debt accounted for 73% and 51% of total inflows, respectively.

Regional Overview

East Asia and Pacific

• Net Financial Flows: Total net financial flows were $418 billion in 2019, a 34% decline from 2018.
• Debt Inflows: Net debt inflows fell to $187 billion, down 45% from 2018, driven by a sharp contraction in flows to China.
• FDI Trends: FDI inflows increased by 50% to $67 billion, with Russia seeing a near-threefold increase to $29 billion.
• Creditor Composition: China accounted for 58% of bilateral debt stocks, while the Asian Development Bank was the largest multilateral creditor.
• DSSI-Eligible Countries: The region includes 15 countries eligible for the Debt Service Suspension Initiative (DSSI), with a combined public debt stock of $44 billion.

Europe and Central Asia

• Net Financial Flows: Net financial flows rose to $93 billion in 2019, a turnaround from the $19 billion outflow in 2018.
• Russia's Role: Russia accounted for 47% of net debt inflows, with long-term debt flows increasing due to a threefold rise in new bond issuance.
• FDI Growth: FDI inflows increased by 50% to $67 billion, led by a rebound in Russia's inflows.
• Creditor Composition: The IMF and World Bank were significant official creditors, with the World Bank providing $0.8 billion to Uzbekistan.

Latin America and Caribbean

• Net Financial Flows: Net flows fell 38% to $173 billion, the lowest level in a decade.
• Debt Inflows: Net debt inflows dropped to $45 billion, the lowest since 2010, with Argentina and Brazil recording the largest contractions.
• Equity Inflows: Equity inflows rose 8%, with FDI increasing on average 9%.
• Creditor Composition: Private creditors dominated long-term debt inflows, while multilateral creditors (IMF) provided significant support to Argentina.
• Bond Trends: Net inflows from bondholders fell 63% to $16 billion due to reduced issuance and increased repayments.

Middle East and North Africa

• Net Financial Flows: Net flows fell to $36 billion, a 16% decline from 2018.
• Debt Inflows: Net long-term debt inflows contracted by 46%, mainly due to a sharp fall in flows from private creditors.
• FDI Trends: FDI inflows declined, but some countries saw increases in short-term debt.
• Creditor Composition: Multilateral creditors accounted for a significant share of long-term debt inflows, while private creditors contributed less.

Main Messages

• Net financial flows to low- and middle-income countries declined in 2019, with significant regional differences.
• China remained the largest recipient of financial flows, but its share decreased from 49% to 36%.
• Equity inflows outpaced debt inflows in most regions, except Sub-Saharan Africa and the Middle East and North Africa.
• Long-term debt growth was more pronounced than short-term debt in many regions.
• FDI trends varied by country, with some experiencing significant increases while others saw declines.
• Official creditors played a key role in supporting debt flows, especially in the context of the Debt Service Suspension Initiative (DSSI).
• Private creditors had a major impact on long-term debt inflows, but their contribution decreased in several regions.
• The World Bank and IMF were important sources of debt financing, especially for DSSI-eligible countries.