The data demonstrates the resilience and untapped potential of emerging markets.
WASHINGTON, USA, April 2, 2024 -/African Media Agency (AMA)/-The World Bank Group today releases highly anticipated exclusive statistics on the credit risk profile associated with investments in private and public sector markets emerging. Making this data publicly available is part of concerted efforts to encourage private investment in emerging and developing economies.
Two reports are made public for the first time. The International Bank for Reconstruction and Development (IBRD) presents statistics on sovereign default and recovery rates dating back to 1985. This data will help rating agencies and private investors better understand risk of IBRD credit.
The International Finance Corporation (IFC) presents statistics on private sector debt repayment (a), broken down by internal credit rating. The report contains information that could reassure private sector investors and encourage them to invest in emerging countries.
“We have previously exclusive and confidential data, which we believe should be considered a public good: their publication will be a source of transparency and give confidence to investors, explain World Bank Group President Ajay Banga. The sole purpose of sharing this data is to encourage private sector capital investment in developing economies in ways that deliver impact and create jobs. »
The World Bank Group’s initiative complements statistics compiled by the Emerging Markets Risk (GEM) Database Consortium; the latter includes 25 multilateral development banks and development finance institutions that aggregate similar data and jointly publish it for public consumption.
The Consortium publishes statistics each year on sovereign and private debt repayment defaults. This week it expanded the information it makes available to the public to include private sector debt recovery rates, broken down by national income level, region and sector.
IBRD staff spent more than a year compiling and cleaning data on sovereign debt defaults from 1985 to 2023. IBRD is the only entity able to compile such statistics due to the global coverage of its portfolio and the breadth of its time series. IFC has similarly compiled statistics on private sector debt defaults over a period of nearly 40 years and published these in a separate report to provide investors with crucial and urgent market information. emerging. Ultimately, these statistics could be combined with other data from development institutions and published through the GEM Consortium.
Highlights from the World Bank Group statistics include:
IFC’s private sector investment portfolio features a low default rate (4.1%) from 1986 to 2023, reflecting the resilience and untapped potential of these investments in emerging markets . The default rate for investments deemed “insecure” according to IFC’s internal rating system was only 2.6% during the period from 2017 to 2023, meaning that even investments considered to be insecure Higher risks may produce better results than expected. Repayment defaults by sovereign borrowers are rare: they are around 0.7% per year on average and the World Bank generally recovers more than 90% of the amounts owed to it in terms of principal and interest. This result is due to its status as a preferred creditor and its ability to satisfactorily manage sovereign credit risk. The loss rate associated with sovereign default is between 0.01% and 58.5%, depending on the level of interest rates and the duration of the default.
Detailed data from the World Bank Group can support more nuanced risk assessment and, therefore, making better investment decisions as well as expanding emerging market countries’ access to capital. The release of these new statistics will support private investment in developing economies by providing more transparency on past results, helping investors assess risk premiums and increasing confidence in the situation in emerging markets.
Distributed by African Media Agency for the World Bank.
Contacts :
In Washington : Jim Rosenberg, (202) 473 0551, [email protected]
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Source : African Media Agency (AMA)