The World Bank recently released its “International Debt Report 2022” (IDR 2022) report shedding light on the trends in external debt and financial flows (debt and equity) across 121 low and middle-income countries during the year 2021. According to the report, public debt reached unprecedented levels during the COVID-19 pandemic in both advanced economies and low & middle-income countries. The year 2021, however, saw an easing of the pandemic and a rebound in global economic activity. The report commented however that the worsening geopolitical tensions stemming from the Russian-Ukrainian war could lead to tighter global financial conditions, higher inflation and lower growth which could have negative consequences on low & middle income countries’ debt dynamics. In figures, the report unveiled that external debt stocks at low and middle-income countries increased by 5.6% in 2021 (same pace registered in 2020) to around $9 trillion. Concurrently, the report uncovered that the value of net debt inflows to aforementioned countries rose during the year 2021 to $559 billion, up from $435 billion in 2020. This mainly owes to the sizeable surge in short-term net debt inflows from $11 billion in 2020 to $278 billion in 2021, the equivalent of half the increase in total net debt inflows. Furthermore, always according to the IDR 2022 report, foreign direct investment (FDI) inflows to concerned countries rose by 37.93% in 2021 to $640 billion.

On the local front, the World Bank report revealed that net debt inflows to Lebanon stood at a negative $4.84 billion in 2021, in comparison with negative $7.16 billion in 2020. This can be attributed to the significant decrease in long-term debt flows from negative $10.26 billion to negative $5.49 billion in 2021, which outweighed the decrease in short-term debt flows from positive $3.11 billion in 2020 to positive $0.65 billion in 2021. Lebanon’s external debt stock contracted by 2.87% in 2021 to $66.89 billion, mainly driven by the 9.44% drop in long-term external debt to $52.92 billion down from $58.44 billion in 2020. As far as net equity inflows are concerned, FDI inflows to Lebanon narrowed during the past year reaching $0.52 billion compared to $2.86 billion in 2020. According to the World Bank report, Lebanon’s external debt to exports ratio dropped from 681.0% in 2020 to 603.0% in 2021 while the external debt to Gross National Income (GNI) ratio rose from 278% in 2020 to 382.0% in 2021. In contrast, the reserves to external debt ratio fell from 36.0% in 2020 to 28.0% in 2021.