DEBT REPORT 2022 -- EDITION II June 2022 DEBT Report 2022 About the Report This is the second of the series of Debt Reports for 2022 to be published online and provide users with data and analysis on external and public debt of low- and middle-income countries. The Debt Reports for 2022: • Complement the information for 123 low- and middle-income countries presented in Interna- tional Debt Statistics (IDS 2022), published in October 2021, and updated in January 2022, with regional and country specific analyses on the composition and characteristics of external debt stocks and flows. These analyses are underpinned by the detailed loan-by-loan data on stocks, transactions (commitments, disbursements, and debt service payments) and loan terms report- ed to the World Bank Debtor Reporting System (DRS). • Draw from the high-frequency Quarterly External Debt Statistics (QEDS) and Quarterly Public Debt Statistics (QPSD) databases to provide users with syntheses of emergent trends in external and public debt, and preliminary estimates of 2021 external debt stocks. • Provide information on current issues and ongoing initiatives aimed at improving external and public debt transparency, including improvements in monitoring and reporting public debt in low- and middle-income countries, filling data gaps, and enhancing debt data dissemination, both coverage and ease of access. Debt Report 2022 Edition II presents preliminary estimates of external debt stocks at end-2021 for low- and middle-income countries and information on new bond issuance in international capital markets in 2021. These estimates build on the regional and country specific external debt data at end-2020 for low- and middle-income countries released in December 2021 and available to users at: https://data.worldbank. org/products/ids. The report also provides an update on new initiatives to enhance debt transparency and broaden the coverage of the debt data collected and disseminated by the World Bank. 1 I. Low- and Middle-Income Countries - increase in external debt stock in 2021 indicates External Stocks at end-2021, a prelimi- a faster pace of external debt accumulation than the 5.3 percent increase recorded in 2019 and nary estimate 2020 and is partly driven by increased short-term borrowing, particularly in the last quarter of 2021 Low- and middle-income countries contin- when global trade began to rebound, and long- ued to borrow apace in 2021 in response to the term borrowing by private sector entities. continued disruption to global economic activity Outcomes in 2021 were driven by the and supply chains as the world endured a second ten largest borrowers, particularly develop- year of the COVID-19 pandemic. Preliminary esti- ments in China. The combined external debt mates indicate that borrowing to mitigate the eco- stock of the ten largest borrowers was an estimat- nomic and social impacts of the pandemic added ed $6.6 trillion at end-2021, 6.7 percent higher around $550 billion to low- and middle-income than the comparable figure for end-2020. This countries’ combined external debt obligations in increase reflected on average a 5.5 percent rise in 2021. This followed a decade in which external long-term external debt stock and a 9.6 percent debt levels had already risen sharply in many coun- increase in short-term debt stock but there was tries leaving them exposed to any sudden changes wide divergence in outcomes between China and in investor risk appetite and compounding the debt the other nine major borrowers. China record- problems of the world’s poorest countries where, ed a 14.4 percent rise in external debt in 2021 to pre-pandemic, many were already assessed at high $2.7 trillion, propelled by an 18.5 percent increase risk of debt distress. in long-term debt and 10.6 percent rise in short- Preliminary estimates indicate the ex- term obligations. In contrast, the external debt ternal debt stock of low- and middle-income of the largest borrowers, excluding China, rose, countries rose, on average, 6.9 percent in 2021 on average, a modest 1.9 percent over the same to $9.3 trillion. The estimate is based on end- period to $3.9 trillion, underpinned by a small 0.9 2021 external debt stocks reported to the Quar- percent increase in long-term external debt and a terly External Debt Statistics (QEDS) by about fifty sharper 7.6 percent rise in short-term obligations. percent of the 123 low- and middle-income coun- The increase in China’s external debt tries reporting to the World Bank Debtor Reporting reflected accommodative fiscal policies to System (DRS), debt bulletins published by borrow- support the post-pandemic recovery and ear- ers, and information from creditor sources, both lier measures to open the country’s financial official and private. The estimated 6.9 percent markets. The Chinese economy grew by around 8 percent in 2021, with increased imports and ex- ports and parallel rise in trade credit. Chinese bor- Figure 1: Low- and Middle-Income Countries - rowers continued to benefit from measures tak- External Debt Stock, 2011-2021 en in recent years to open the country’s financial US$ (trillion) markets, give broader access to external financing 10 to small and medium-sized private sector entities External Debt Stock and implement exchange rate and related policies 9 Long-term that facilitated the inclusion of renminbi-denomi- Short-term 8 nated bonds in global benchmark indices. A major 7 factor in external debt stock accumulation in 2021 was the increase in foreign investors holdings of 6 renminbi-denominated bonds, including large fi- 5 nancial institutions and pension funds and individ- ual investors. In addition, both public and private 4 sector entities continued to issue bonds in inter- 3 national capital markets. These issues included two successive $4 billion sovereign Eurobonds in 2 October 2021 followed by a €4 billion ($4.6 billion) 1 issue in November with tranches ranging from 3-year to 30-year maturity and a $1 billion 5-year 0 green bond 1.625 percent issue by the Industrial 20112012201320142015201620172018201920202021 and Commercial Bank of China that will be used Sources: World Bank Debtor Reporting System, Quarterly to finance, or refinance, eligible green assets in External Debt Statistics and staff estimates. the Green Bond Framework. Overall, however, 2 bond issuance by Chinese entities in international markets slowed in 2021, falling 31 percent from the Figure 2: Top Ten Borrowers - External Debt prior year level to $150 billion. China accounted Stocks, end-2020 and end-2021 for an estimated 29 percent of the combined exter- nal debt stock of low- and middle-income countries US$ (billion) and close to 50 percent of their combined gross do- Argentina mestic product (GDP). For major borrowers, other than China, Brazil external debt outcomes were a mixed bag in China 2021. As a group, they registered only a modest, 1.9 percent increase in external debt stock in 2021 but India for individual countries the change in end-2021 ex- Indonesia ternal debt stock, relative to the comparable figure 2021 at end-2020, ranged from a 9.1 percent increase Mexico for India to a 5.6 percent contraction in South Afri- 2020 Russia ca. The rise in India’s external debt, to an estimated $615 billion, was driven by an 11.1 percent increase South Africa in short-term debt obligations, reflecting a rise in trade credit that paralleled the economic rebound, Thailand and an 8.7 percent rise in long-term debt, driven Turkey primarily by borrowing by private sector entities. An increase in trade-related short-term external 0 1000 2000 3000 debt was also the primary factor driving the esti- Source: Quarterly External Debt Statistics. mated 4.8 percent rise in Brazil’s external debt in 2021. It rose an estimated 9.8 percent in 2021 com- pared to an estimated 3.7 percent increase in Bra- average, 6 percent in 2021, slightly faster than in zil’s long-term external debt. In contrast, Thailand 2020, notwithstanding the 5.6 percent contraction borrowed to mitigate the impact of the pandemic in South Africa’s external debt stock. This reflected which pushed long-term external debt up an esti- double-digit increases in the external public and mated 7 percent in 2021, whereas short-term debt, publicly guaranteed external debt of several coun- which accounts for around one-third of Thailand’s tries in the region including estimated increases of total external debt, contracted by an estimated 1.9 around 15 percent for Ghana and Nigeria. In the percent. Overall Thailand’s external debt rose an Middle East and North Africa region external debt estimated 3.7 percent in 2021 to $198 billion. As accumulation is estimated to have slowed to 5.5 with 2020, the contraction in South Africa’s external percent in 2021, from 8.5 percent in 2020, with an debt in 2021 was again largely driven by non-resi- estimated 13 percent rise in external debt stock dent investors sell-off of rand-denominated bonds. recorded by Egypt, the region’s largest borrower, The external debt stock of Argentina and Mexico offset by a 1 percent contraction in Morocco and a are estimated to have fallen moderately in 2021, moderate, estimated 2 percent, increase in Leba- 1.7 percent and 2.2 percent, respectively, due to a non. contraction in both countries in long-term external Turning to the three regions that account debt stock. for the largest share of low- and middle-income External debt stock accumulation in countries’ external debt in Latin America and the 2021 varied widely at the regional level. Coun- Caribbean external debt stocks rose an estimated tries in the South Asia region seem to have the 3.4 percent in 2021, a marked contrast to the 0.3 sharpest rise in external debt stocks in 2021, an percent contraction recorded in 2020. The rise in estimated 10.2 percent increase to $900 billion. 2021 was propelled by the estimated 4.8 percent This was driven largely by the estimated 9 percent increase in Brazil’s external debt, which offset the rise in the external debt of India, which accounts estimated 2.2 percent contraction in Mexico, and for around 70 percent of the combined external sharp increase in external debt accumulation in debt of the region, but Bangladesh and Pakistan other countries in the region, including Colombia also recorded a sharp rise in long-term external and Peru, up an estimated 11 percent and 22 per- public and publicly guaranteed debt with estimat- cent, respectively, over the prior year. In contrast, ed increases of 23 percent and 12 percent, respec- external debt stocks in the Europe and Central tively, in 2021. External debt stocks of countries in Asia region accumulated at a much slower pace Sub-Saharan Africa are estimated to have risen, on in 2021, rising on average an estimated 1.3 per- 3 Figure 3: External Debt Stock by Region - Percent Change, 2019-2021 Percent 16 14 12 2019 2020 2021 10 8 6 4 2 0 -2 China East Asia and Europe and Latin America Middle East South Asia Sub-Saharan Pacific excl. Central Asia and Caribbean and North Africa China Africa Sources: World Bank Debtor Reporting System, Quarterly External Debt Statistics and staff estimates. cent as compared to an increase of 3.1 percent QEDS provide a strong indicator of evolv- in 2020. The downturn reflected a general slow- ing trends in external debt stocks of low- and down in external borrowing across the region middle-income countries. Currently, 67 coun- and, in some countries e.g., Romania, an estimat- tries (55 percent) of the 123 low- and middle-in- ed 2 percent contraction in external debt stocks. come countries reporting to the DRS and included The pace of debt accumulation also slowed in the in IDS2022, report regularly to the high frequency East Asia and the Pacific region, excluding China, QEDS database. Although the number of DRS-re- with external debt stocks rising an estimated 3.5 porters reporting to QEDS is relatively low, the 67 percent in 2021, less than half the 7.8 percent in- countries that do report to QEDS include most of crease in 2021, due in part to a small contraction the low- and middle-income countries largest bor- in Indonesia’s external debt. However, the aver- rowers. The combined external debt stock of coun- age masks an increase of 20 percent or more in tries reporting to QEDS accounted for 90 percent of the external debt stock of several Pacific islands low- and middle-income countries with $8.7 trillion that were particularly hard hit by the pandemic external debt stock outstanding at end-2020 and and climate-change induced natural disasters. is estimated to account for a comparable share of the $9.3 trillion estimated to be outstanding at end- 2021. At the regional level, QEDS reporters’ share of the combined external debt stock ranged from Figure 4: External Debt Stock Regional Share, end- 98 percent in South Asia to 48 percent for Sub-Sa- 2021 haran Africa where several of the region’s large Percent borrowers, including Angola and Nigeria, do not re- China port to QEDS. Reporting to the DRS is mandatory for all World Bank borrowers whereas reporting to 8% East Asia and QEDS is voluntary, although strongly encouraged, 10% Pacific excl. and new countries opt in on a continuous basis. 29% Low- and middle-income countries not currently China 4% Europe and reporting to QEDS are largely the poorest, IDA-eli- Central Asia gible countries, including those classified as fragile Latin America states, where debt management capacity is often 21% and the weak. Over half are in Sub-Saharan Africa where 10% Caribbean only 11 countries actively participate in QEDS at Middle East and present, i.e., 26 percent of the 43 Sub-Saharan Afri- 18% North Africa can countries reporting to the DRS. In contrast 80 South Asia percent of DRS reporting countries in Europe and Central Asia, 78 percent of those in Latin America Sources: Quarterly External Debt Statistics, creditor sources and and the Caribbean and 75 percent in the South Asia staff estimates. region provide comprehensive quarterly informa- tion to QEDS. 4 Figure 5: Low- and Middle-Income Countries Reporting to QEDS by Region Percent 100 90 80 70 60 50 40 30 20 10 0 East Asia and Europe and Latin America Middle East South Asia Sub-Saharan All low- and Pacific Central Asia and the and North Africa middle-income Caribbean Africa countries Percentage of countries reporting to QEDS QEDS reporters's share of region by external debt stock by end-2020 Sources: World Bank Debtor Reporting System and Quarterly External Debt Statistics. II. Bond Issuance in international capi- In low- and middle-income countries, tal markets in 2021 other than China, bond issuance was down only marginally in 2021. Public and private sector bor- Bond issuance in international capital rowers in these countries issued a combined total markets by low- and middle-income countries of $231 billion in international capital markets in fell 16 percent in 2021 following a drop in is- 2021, 3 percent below the 2020 issuance of $238 suance by both public and private sector bor- billion. However, in contrast to 2020, when 75 per- rowers. Data compiled by the private data col- cent of total bond issuance was by sovereign gov- lection service Dealogic, from creditor and other ernments and public sector borrowers, 2021 was market-based sources, report bond issuance in characterized by a surge in new bond issues by international capital markets by 123 low- and mid- private sector entities without a government dle-income countries reporting to the DRS totaled guarantee. They rose 48 percent over the 2020 $381 billion in 2021, 16 percent below the prior level to $89 billion and accounted for 39 percent year issuance of $455 billion. The downturn in of 2021 bond issuance by low- and middle-income 2021 was driven by a 21 percent fall in new issues countries, excluding China. Bond issues by sover- by sovereign governments and other public sector eign governments and other public and publicly entities to $227 billion, from $286 billion in 2020. guaranteed borrowers in low and middle-income New issuances by private sector entities without countries, other than China, fell 17 percent in 2021 a government guarantee fell 9 percent in 2021 to to $142 billion. $154 billion. Bond issuance by the world’s poorest, China drove the downturn in bond issu- IDA-eligible, countries rebounded in 2021. The ance by low- and middle-income countries in combined bond issuance by IDA-eligible countries 2021. Public and private sector borrowers in Chi- surged to $29.4 billion, four and half times the na issued $150 billion in international capital mar- $6.6 billion issued in 2020 and triple the $9 billion kets in 2021, 31 percent lower than the $218 billion raised in international capital markets in 2019. issued in 2020. Issuance by public sector entities Almost 90 percent of the 2021 issuance was by in China, including policy banks such as China Ex- sovereign governments, or public sector entities im-bank, fell 23 percent in 2021 to $84 billion and with a government guarantee such as the Water issuance by private sector entities fell 40 percent and Power Development Authority (Pakistan) and to $66 billion. China accounted for 39 percent of Uzbekneftegaz JFC (Uzbekistan). Private sector bond issuance by low- and middle-income coun- entities issued a combined total of $3.3 billion in tries in 2021, down from a comparable 48 percent international bond markets in 2021, of which 81 share in 2020. The fall in bond issuance by Chinese percent were accounted for by entities in Nigeria borrowers, both public and private, stemmed in in the oil and gas and financial sector. large part from the increase in non-resident inves- Outcomes at the regional level in 2021 tors purchase of bonds issued in China’s domestic were disparate ranging from a 225 percent rise debt market. in bond issuance in the Sub-Saharan Africa re- 5 Figure 6: Bond Issuance by Low- and Middle- fell to $3.3 billion in 2021 from $17.6 billion in 2020 Income Countries (LMICs) by Debtor Type and the 39 percent fall in those by comparable enti- US$ (billion) ties in Romania, to $8.2 billion. Bond issuance also fell sharply, by 25 percent, in the Middle East and LMICs Public Sector North Africa region where only Egypt and Morocco were active in international markets in 2021 and because their combined issuance was 13 percent LMICs Private Sector lower than that of 2020. In the Latin America and the Caribbean region bond issuance fell 11 percent LMICs Public Sector excl. in 2021 to $94 billion of which 58 percent was ac- China counted for by Brazil and Mexico. Their combined LMICs Private Sector issuance of $54 billion in 2021 was broadly in line excl.China 2021 with 2020 but the share of issues by private sec- 2020 tor entities rose to 61 percent, from 36 percent in China Public Sector 2020. This reflected a surge in issuance by private 2019 sector entities in Brazil to $21 billion, from $5.7 bil- lion in 2020. China Private Sector Bond issuance by countries in Sub-Sa- haran Africa resurged in 2021 to $21.1 billion. 0 100 200 300 This was 225 per percent higher than the issuance Sources: World Bank Debtor Reporting System and Dealogic. in 2020 and largely reflected sovereign govern- ments return to international bond markets after gion to a 29 percent contraction in Europe and the shutdown in 2020 due to the impact of the Central Asia. A resumption of sovereign bond COVID-19 pandemic on investor sentiment and issues, used in part to refinance prior, more ex- market conditions. Only three Sub-Saharan Afri- pensive issues, was a principal factor in the rise in can countries raised sovereign Eurobond in 2020, bonds issued by Sub-Saharan African countries in Gabon, Ghana in 2020 prior to the onset of the 2021. New issuance was also up 84 percent in the pandemic and Côte d’Ivoire late in the year when South Asia region due to 48 percent rise in bond market conditions eased; for a combined issuance issues in India to $19.4 billion, driven primarily of $5.3 billion. In contrast, in 2021 nine countries by increased issuance by private sector entities, in the region came to the market for a total of $14 and Pakistan’s return to the bond markets after billion in sovereign bond issues including a $500 a 3-year hiatus. Bond issues by countries in the million 6-year, 4.3 percent issue by the public util- East Asia and Pacific region in 2021, other than ity company Eskom (South Africa) guaranteed by China, were largely on a par with the prior year, the Republic of South Africa. In addition, private rising a modest 3 percent. The sharp downturn in non-guaranteed borrowers, primarily Nigerian and issuance by countries in Europe and Central Asia South African entities, issued $6.6 billion in bonds, was largely attributable to the steep contraction a sixfold increase from the $1.1 billion issued in in issues by public sector entities in Russia which 2020. Figure 7: Regional Distribution of Bond Issuance by Low- and Middle-Income Countries, 2019-2021 US$ (billion) 250 2019 2020 2021 200 150 100 50 0 China East Asia and Europe and Latin Middle East South Asia Sub-Saharan Pacific excl. Central Asia America and and North Africa China the Africa Caribbean Sources: World Bank Debtor Reporting System and Dealogic. 6 Figure 8: Bond Issuance by Sovereigns and Public cent in June 2021. It will be used in part to buyback Sector Entities in Sub-Saharan Africa, 2019-2021 70 percent of the Eurobond maturing in 2024 and denominated in US dollars. US$ (billion) Some 2021 sovereign Eurobond issues Sub-Saharan Africa had innovative features. Ghana’s sovereign four South Africa tranche Eurobond issue in April 2021 included a $525 million 4-year zero coupon bond. Priced at Senegal 78 US cents per dollar to attract investors, it lowers Rwanda debt service obligations between issue and matu- Nigeria 2021 rity in 2025, compared to a standard coupon (in- terest) paying Eurobond. Bondholders will receive Kenya 2020 $525 million at maturity and the Ghanian govern- Ghana 2019 ment pledged to use some of the bond proceeds Gabon and the interim reduction in debt servicing costs to repay domestic currency public debt. The Republic Cote d'Ivoire of Benin’s €500 million Eurobond 4.95 percent due Cameroon 2035 was the first sovereign issue by a Sub-Saha- ran African to be linked directly to the United Na- Benin tions Sustainable Development Goals (SDGs). The Angola proceeds will be used to finance or refinance green or social eligible expenditures, in line with Benin’s 0 10 20 SDG bond framework, which in turn will contrib- Sources: World Bank Debtor Reporting System and Dealogic. ute to the country’s commitments to achieving the SDGs. Proceeds of the 2021 sovereign Euro- bond issues by Sub-Saharan African countries Table 1: Sub-Saharan African Eurobond Sovereign were used to refinance prior issues. Active debt management of public debt portfolios enabled Issuance 2021 borrowers to moderate repayment risks and/or Issue Amount Tenor reduce borrowing costs with a lower coupon (in- Country Date US$ (million) (Years) Coupon terest) than that of prior issues. The Republic of Benin Jan-21 852 11 4.875 Benin was the first Sub-Saharan African country to Benin Jan-21 365 31 6.875 issue a Eurobond in international markets in 2021. It raised €1 billion (US$1.2 billion) in a two-tranche Benin Jul-21 590 13.5 4.95 operation, €700 million with a final maturity of 11 Cameroon Jun-21 816 11 5.95 years at 4.875 percent and €300 million with a 31- Cote d’Ivoire Feb-21 726 11 4.3 year maturity at 6.875 percent. The issue included a liability management operation which allowed Cote d’Ivoire Feb-21 302 27 5.75 for early repayment of 65 percent of Benin’s de- Gabon Nov-21 800 10 7 but 2019 Eurobond due in 2026 thereby enabling Ghana Mar-21 1,000 7 7.75 Benin to limit the risk of refinancing, extend the maturity of the public debt portfolio and reduce Ghana Mar-21 1,000 12 8.625 the average borrowing costs. The bond proceeds Ghana Mar-21 500 20 8.875 were also used to finance the budget and flagship Ghana Mar-21 525 4 0 projects in the national development plan. Several other countries used longer-dated, lower coupon Kenya Jun-21 1,000 12.6 6.3 Eurobonds to refinance prior issues. For example, Kenya Sep-21 1,250 7 6.125 Cameroon’s €685 million ($816 million) 11-year Nigeria Sep-21 1,500 12 7.375 5.95 percent issue in June 2021 will be used to refi- Nigeria Sep-21 1,250 20 8.25 nance its debut 2015, 9.5 percent Eurobond. Sim- ilarly, Rwanda’s $620 million 10-year, 5.5 percent Rwanda Aug-21 620 10 5.5 2021 issue which will be used in part to repay its Senegal Jun-21 948 16 5.375 $400 million 6.875 percent debut bond issued in 2013 and due in 2023. Senegal raised €775 million Sources: Dealogic, Bond Prospectus and national debt office press releases. ($946 million) with a 16-year maturity at 5.375 per- 7 III. Raising the Bar on Debt Data Trans- Robust debt data recording and reporting parency – New Initiatives are the cornerstone of sound debt management practices. To promote debt data transparency, the Comprehensive, accurate, and time- World Bank organized an online seminar Raising the ly information on public debt is essential for Bar on Debt Transparency in April 2022. The semi- sound policy decisions and robust debt man- nar, organized in collaboration with the Executive Di- agement. Debt transparency facilitates new, rector for Japan at the World Bank, brought together high-quality investment, reduces corruption, experts from borrower and creditor countries and and brings accountability. All too often, howev- academia to discuss ongoing efforts and concrete er the public debt liabilities of low- and middle-in- actions to enhance debt reporting and recording at come countries are hard to pin down. Many do the national level as well as reconciliation of debt- not publish public debt data or publish incomplete or and creditor records and information captured in data that understate the true level of liabilities. datasets compiled by academia. The opacity of some domestic debt markets, the The seminar also offered an opportunity increased use of central bank currency-swaps, and for the World Bank to unveil ongoing enhance- proliferation of borrowing by state-owned and ments to the DRS to support the debt transpar- private sector entities with various forms of gov- ency agenda. Instituted in the 1950s, the DRS is the ernment guarantee pose significant challenges to recognized international database for the external global surveillance of debt levels. The recent surge debt of low- and middle-income countries and the in debt levels in low- and middle-income countries established debtor-side repository. It is a one-stop and the increased risk of a global debt crisis have source of external debt data compiled in accordance led to a wide consensus in the international com- with agreed international standards and definitions munity about the need to achieve a greater lev- to support cross-country analyses of the debt obliga- el of public debt transparency. This demand has tions of low- and middle-income countries and the been heightened by the fallout from the COVID-19 terms and conditions on which they were contract- pandemic which has seen public revenues decline, ed. The four-point agenda to enhance the DRS public-sector deficits widen and public borrowing centers on: redesigning the DRS to align with bor- surge, with increased risk that unreported liabil- rowing patterns and support current data needs; ities may emerge. Lack of transparency makes it extending the coverage of the DRS to domestic harder for borrowers to service their public debt public debt; closing data gaps to enhance DRS and for creditors to support them if restructuring data quality and coverage; and expanding and is necessary. facilitating access to the DRS data. 8