Poor Countries Need “Global” Debt Relief: The World Bank …
The debt burden in low-income countries jumped 12% to a record $ 860 billion in 2020 amid the pandemic, prompting World Bank President David Malpass to call on Monday. to a “comprehensive plan” to deal with the problem.
“Sustainable debt levels are essential for economic recovery and poverty reduction,” he said.
Efforts to tackle Covid-19 have exacerbated already rising debt levels, and addressing the issue will require relief from lenders, Malpass said.
The situation is urgent since the Debt Service Suspension Initiative (DSSI) launched by G20 countries early last year, which allows countries to defer payment of their debt while fighting Covid-19 , expires at the end of 2021.
The DSSI “was not broad enough, but suspended some of the debt,” Malpass told reporters, warning that given the debt challenge for poor countries, it may need to be extended.
“I think the world should think about what to do after January 1. And a suspension is something that could be considered,” he said.
The World Bank and IMF are holding their fall meetings this week in Washington, which some officials will be attending in person for the first time since 2019, although others will participate virtually.
New data from the World Bank shows that the deterioration in debt indicators was widespread and had an impact on countries in all regions, in all low- and middle-income countries.
“Many developing countries entered 2020 into a vulnerable position, with public external debt already at high levels,” the report says, and then governments provided unprecedented resources to try to contain the virus and the economic fallout. .
The World Bank and the IMF have also increased their support, especially for the most vulnerable countries.
However, some poor countries have seen their indebtedness increase by up to 20%, and for the most part, economic growth and incomes as well as exports have not increased.
Speaking to reporters, Malpass said the pandemic had caused “tragic setbacks” in the development of poor countries nationwide.
“Progress in reducing extreme poverty has been delayed by several years, for some by a decade median incomes have fallen rather than increased,” and women and children have borne the brunt of the impact negative effects of the recession, he said.
In 2020, net inflows of multilateral creditors to low- and middle-income countries reached $ 117 billion, “the highest level in a decade,” according to the report.
“The risk now is that too many countries emerge from the Covid-19 crisis with significant debt distress that could take years to manage,” Malpass said in the report.
“We need a comprehensive approach to the debt problem, including debt reduction, faster restructuring and improved transparency,” he said.
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