BRICS Double Lending to Poor Countries as Foreign Direct Investment Falls to Lowest Point since 2009 Crisis

Stocks and Financial Services Press Releases Wednesday November 15, 2017 08:29
WASHINGTON--15 Nov--World Bank

WASHINGTON, November 14, 2017 – In its latest analysis of global debt and equity flows, the World Bank reports that financial flows to low- and middle-income countries rose in 2016 to $773 billion - three times their 2015 levels, according to International Debt Statistics 2018 (IDS 2018) released today.

However, this trend did not extend to the poorest countries. Among the 59 countries that qualify only for the World Bank's lending program for the world's most impoverished countries, (IDA), net debt inflows fell 34% to $17.6 billion - their lowest level since 2011.

This fall came as tighter market conditions and credit rating downgrades blunted access to private capital, and as inflows from bilateral creditors dropped. Activity from the BRICs suggest that this trend may be temporary, with new loan commitments to low- and middle-income countries more than doubling in 2016 to $84 billion.

Amid the rise in net financial flows, foreign direct investment (FDI) fell 11 percent in 2016 to $481 billion, a level not seen since 2009. The drop in FDI, traditionally the largest and least volatile of external financial flows to low- and middle-income countries, reflected the fragility of the global economy, sluggish growth in some commodity-exporting countries and a slump in profits earned by multilateral enterprises.

""These international debt statistics are a vital input for debt managers, policymakers and researchers working to improve the management of global capital flows. Expanding the scope of the online data and making them available at the earliest opportunity is an important goal of the Bank's commitment to Open Data"", says Haishan Fu, Director of the Bank's Development Data Group which produces the report and database.

International Debt Statistics 2018 presents further analysis of key trends and developments in debt and equity flows in 2016. Some highlights include:
  • Net financial (debt and equity) flows to low- and middle-income countries rebounded in 2016 to $773 billion. Renewed net long-term debt inflows (loan disbursements minus principal payments), which climbed to $264 billion, and a reversal in short-term debt flows drove the rebound and offset a 7 percent fall in net equity inflows.
  • External debt stocks rose 4.1 percent in 2016 but external debt ratios deteriorated. The average ratio of external debt-to-GNI (26 percent) and to export earnings (107 percent) remains moderate but 25 percent of low- and middle-income countries had a ratio of external debt-to-GNI above 60 percent at end 2016 and 44 percent of countries a debt-to-exports ratio above 150 percent.
  • The rebound in net debt inflows to low and middle-income countries in 2016 did not extend to the world's poorest countries. Net debt inflows to IDA-only countries fell 34 percent in 2016 to $17.6 billion their lowest level since 2011, driven by a downturn in inflows from official sources and collapse in inflows from private creditors.
  • New loan commitments from bilateral creditors more than doubled in 2016 to $84 billion driven by new financing from other low- and middle-income countries, primarily the BRICs and notably China, in the context of the 'One Belt One Road' initiative launched in 2013.

International Debt Statistics 2018 presents statistics and analysis of external debt and financial flows (debt and equity) of low- and middle-income countries for 2016. This year's edition provides a short overview and summary tables, complemented by a fuller, expanded dataset available online.

The World Bank's Debtor Reporting System (DRS), the primary source for the data on the external debt of low- and middle-income countries presented in International Debt Statistics was established in 1951.

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