David Malpass, President of World Bank has urged G20 (Group of 20 leading economies in the world) to extend the current deferment allowed to the poorest countries on debt repayments till the end of 2021 as well as expand its scope to deal with the global pandemic.
During virtual meeting of G-20 finance ministers and central bankers, Mr. Malpass said that the virus and worldwide recession will lead to rising poverty in poor nations and debt burdens for some countries are rising to dangerous levels.
Last month, the World Bank had forecasted on emerging markets’ output to decrease for the first time in at least six decades. Even with the G-20’s April agreement which intends to waive about $12 billion in bilateral debt payments from vulnerable countries, the increasing rate of COVID-19 infections in many countries is forcing their cost of servicing obligations to crowd out health and social expenses.
Mr. Mapass added that while some economies continue to have access to capital markets for borrowing, investors are being driven by a search for yield and that complacency risks a new debt crisis that spreads beyond the poorest countries and could weigh on them for decades. He also called for debt reduction, resolution and more transparency.
The Debt Service Suspension Initiative that started in May and runs till the end of this year should be implemented in a transparent way by all official bilateral creditors, including national policy banks, Malpass opined. He also highlighted the need for full participation by the China Development Bank while saying that borrowing countries participating in the plans have identified $8.4 billion in eligible savings.
“The situation in developing countries is increasingly desperate,” Malpass said. “Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency.”
