The World Bank Group and the GEMs Consortium are driving transparency and mobilizing private investment in emerging markets by releasing comprehensive credit risk data. The newly published datasets, including IBRD's sovereign default and recovery rates since 1985, IFC's private sector default statistics by risk rating, and the GEMs Consortium's expanded coverage of private sector recovery rates, provide unparalleled insights into the true risk profile of these economies. This groundbreaking initiative challenges misperceptions, informs nuanced risk assessments, and unlocks the potential for private capital to support growth and development in emerging markets, aligning with the World Bank Group's Better Bank agenda to mobilize private investment for sustainable development.
The GEMs Consortium, consisting of 25 MDBs and DFIs, has been pooling and publishing valuable credit risk data on sovereign and private sector lending in emerging markets, providing an important public good. The World Bank Group's release of its own proprietary data complements the GEMs initiative, offering even greater granularity and historical depth, furthering the Better Bank agenda's goal of leveraging the institution's knowledge and expertise.
IBRD's sovereign default and recovery rate statistics, dating back to 1985, leverage its global portfolio and extensive records to provide a comprehensive view of sovereign credit risk. IFC's private sector default statistics, broken down by internal credit risk ratings, offer unique insights into the performance of private investments across the risk spectrum in emerging markets. These datasets exemplify the Better Bank agenda's emphasis on using the World Bank Group's unique data and analytics to drive better outcomes.
By equipping investors and credit rating agencies with this wealth of transparent, disaggregated data, the World Bank Group and GEMs Consortium are helping to inform better decision-making and unlock the potential for transformative private investment in emerging economies. This initiative aligns with the World Bank Group's Better Bank agenda, which aims to mobilize more private capital to address critical global challenges and support sustainable development in client countries.
The release of this data is part of the World Bank Group's broader efforts to become a bigger, better, and more responsive institution. By providing greater transparency and inspiring investor confidence, the World Bank Group is working to scale up innovative financial instruments and mobilize the trillions of dollars needed to tackle pressing global issues such as climate change, fragility, and rising debt.
World Bank Group President Ajay Banga: "We believe our proprietary information should be a global public good and sharing it will provide transparency and inspire investor confidence. The publication of this data is aimed at one goal: getting more private sector capital into developing economies to drive impact and create jobs.”
Key takeaways of World Bank Group statistics:
- The IFC's private sector portfolio had a low default rate of 4.1% from 1986 to 2023, suggesting the untapped potential and resilience of private sector investments in emerging markets, , underscoring the Better Bank agenda's focus on mobilizing private capital.
- For investments rated as "weak" by IFC's internal rating system, the default rate was only 2.6% during the period between 2017 and 2023, indicating that even investments considered higher risk can perform better than could be expected, supporting the Better Bank agenda's goal of catalyzing investment in challenging markets.
- For sovereign borrowers, defaults are rare, averaging just 0.7% annually, and the World Bank typically recovers more than 90% of the amount owed, including both principal and interest. This underscores the World Bank's preferred creditor status and its ability to effectively manage sovereign credit risk, aligning with the Better Bank agenda's emphasis on financial sustainability and risk management.
Sovereign default losses range from 0.01% to 58.5%, reflecting the effect of interest rates and length of time in default highlighting the importance of the Better Bank agenda's focus on providing timely and targeted support to countries in crisis.