Challenges such as demographic shifts, climate change, technological advancements, high inflation, and limited employment opportunities compounded by limited fiscal space. Approximately 60% of IDA countries collect less than 15% of their GDP in tax revenues, mainly due to a significant informal economy and ineffective tax policies. Currently, 54% of IDA countries face high risk or actual debt distress, projected to spend $185 billion on debt service in 2024, exceeding their total public spending on health and education. Healthcare expenditure accounts for only 1.6% of GDP.
Moreover, lower trade openness further isolates these nations. Digital divides limit participation in the growing digital trade, and inadequate financial sectors hinder credit access, with domestic credit to the private sector accounting for only 34.9% of GDP. The private sector in the IDA is characterized by informality and low productivity, facing significant barriers and limited government support. Foreign direct investment has declined from 3.9% of GDP in 2012 to approximately 1.4% in 2022, primarily due to weak governance and regulatory frameworks.
Public sector capacity remains a challenge. Corruption and weaknesses in public financial management persist, hindering economic opportunities and exacerbating poverty. While some progress has slowed, IDA helps countries that lack recent household survey data to measure poverty, which allows effective policy design and implementation amid emerging technologies such as AI and big data.
IDA's Kenya Jobs and Economic Transformation Project (KJET) to benefit more than 45,000 Kenyans through new or improved job prospects. The project aims to scale up green SME financing, mobilizing green private capital to support SMEs' adoption of green technologies.
Last Updated: Jun 30, 2025
