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Debt of 26 poorest countries at 18-year high

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Two-thirds face armed conflicts or institutional fragility

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Natural disasters cause average annual losses of 2% of GDP

(Adds details on countries in World Bank study, paragraph 5)

By David Lawder

WASHINGTON, Oct 13 (Reuters) - The world's 26 poorest

countries, home to 40% of the most poverty-stricken people, are

more in debt than at any time since 2006 and increasingly

vulnerable to natural disasters and other shocks, a new World

Bank report showed on Sunday.

The report finds that these economies are poorer today on

average than they were on the eve of the COVID-19 pandemic, even

as the rest of the world has largely recovered from COVID and

resumed its growth trajectory.

Released a week before World Bank and International Monetary

Fund annual meetings get underway in Washington, the report

confirms a major setback to efforts to eradicate extreme poverty

and underscores the World Bank's efforts this year to raise $100

billion to replenish its financing fund for the world's poorest

countries, the International Development Association (IDA).

The 26 poorest economies studied, which have annual

per-capita incomes of less than $1,145, are increasingly reliant

on IDA grants and near-zero interest rate loans as market

financing has largely dried up, the World Bank said. Their

average debt-to-GDP ratio of 72% is at an 18-year high and half

of the group are either in debt distress or at high risk of it.

Most of the countries in the study are in sub-Saharan

Africa, from Ethiopia to Chad and Congo, but the list also

includes Afghanistan and Yemen.

Two thirds of the 26 poorest countries are either in armed

conflicts or have difficulty maintaining order because of

institutional and social fragility, which inhibit foreign

investment, and nearly all export commodities, exposing them to

frequent boom-and-bust cycles, the report said.

"At a time when much of the world simply backed away from

the poorest countries, IDA has been their lifeline," World Bank

chief economist Indermit Gill said in a statement. "Over the

past five years, it has poured most of its financial resources

into the 26 low-income economies, keeping them afloat through

the historic setbacks they suffered."

IDA normally is replenished every three years with

contributions from World Bank shareholding countries. It raised

a record $93 billion in 2021 and World Bank President Ajay Banga

is aiming to exceed that with more than $100 billion in pledges

by Dec. 6.

Natural disasters have also taken a greater toll on these

countries over the past decade. Between 2011 and 2023, natural

disasters were associated with average annual losses of 2% of

GDP, five times the average among lower-middle-income countries,

pointing to the need for much higher investment, the World Bank

said.

The report also recommended that these economies, which have

large informal sectors operating outside their tax systems, do

more to help themselves. This includes improving tax collections

by simplifying taxpayer registration and tax administration and

improving the efficiency of public spending.