Governments across the globe were saddled in 2022 with surging cost of borrowing and some, especially the poorest ones, are facing the risk of debt crises as public obligations reach record levels amid high interest rates, according to the World Bank.
The multilateral lender came out with its latest International Debt Report on Dec. 13 even as global credit watchdog Fitch Ratings sees the Philippines debt profile improving, albeit slower than previously hoped for.
The World Bank found that, amid the biggest surge in global interest rates in four decades, developing countries spent a record $443.5 billion to service their external public and publicly guaranteed debt in 2022.
The result was that scarce resources were shifting away from critical needs such as health, education, and the environment.
Further, for all developing countries including the Philippines, debt-service payments that include principal and interest rose by 5 percent over the previous year.
World Bank chief economist Indermit Gill said in a statement that during every quarter when interest rates stay high, more developing countries become distressed and face the difficult choice of servicing their public debts or investing in public health, education, and infrastructure.
“The situation warrants quick and coordinated action by debtor governments, private and official creditors, and multilateral financial institutions—more transparency, better debt sustainability tools, and swifter restructuring arrangements,” Gill said. “The alternative is another lost decade.’’