World Bank calls on China to go all out for relieving debt of poorer nations

Faster G20 debt relief is what poorer developing nations need, the World Bank said on Tuesday, reiterating its calls for China, the world’s largest creditor, and private-sector creditors, to reverse course and go all out for participating in debt relief efforts.

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The COVID-19 pandemic-induced recession in 2020 left around 60 percent of low-income countries in or at high risk of debt distress, and many emerging economies were struggling as well, World Bank President David Malpass told reporters as the bank unveiled its latest Global Economic Prospects report.

As reported by Reuters, the document said that debt levels in emerging markets and developing economies had risen at the fastest pace in three decades and while growth in low-income economies was projected to strengthen in 2022 to 4.9 percent and in 2023 to 5.9 percent, income per capita is forecast to remain below pre-pandemic levels this year in half of them.

In 2022 alone, the poorest countries faced USD 35 bn in debt service payments to official bilateral and private creditors, with over 40 percent of that due to China, after a freeze in debt payments ended last year, Mr Malpass said.

“Risks of disorderly default are growing; the tightening of monetary policy in advanced economies will have a ripple effect,” he said, repeating his call for reforms to the common framework launched by the Group of 20 major economies and the Paris Club of official creditors in November 2020.

The framework aims to provide debt relief chiefly through maturity extensions and interest rate reductions for countries eligible for repayment moratoriums under the Debt Service Suspension Initiative (DSSI), but progress has been sluggish.

“Deep debt relief is much needed for the poorer countries. If we wait too long, it will be too late,” Mr Malpass said, calling for an end to non-disclosure agreements often demanded by China and other creditors, as well as clear rules for assessing and enforcing comparable treatment among all creditors.

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The COVID-19 pandemic-induced recession in 2020 left around 60 percent of low-income countries in or at high risk of debt distress, and many emerging economies were struggling as well, World Bank President David Malpass told reporters as the bank unveiled its latest Global Economic Prospects report.

As reported by Reuters, the document said that debt levels in emerging markets and developing economies had risen at the fastest pace in three decades and while growth in low-income economies was projected to strengthen in 2022 to 4.9 percent and in 2023 to 5.9 percent, income per capita is forecast to remain below pre-pandemic levels this year in half of them.

In 2022 alone, the poorest countries faced USD 35 bn in debt service payments to official bilateral and private creditors, with over 40 percent of that due to China, after a freeze in debt payments ended last year, Mr Malpass said.

“Risks of disorderly default are growing; the tightening of monetary policy in advanced economies will have a ripple effect,” he said, repeating his call for reforms to the common framework launched by the Group of 20 major economies and the Paris Club of official creditors in November 2020.

The framework aims to provide debt relief chiefly through maturity extensions and interest rate reductions for countries eligible for repayment moratoriums under the Debt Service Suspension Initiative (DSSI), but progress has been sluggish.

“Deep debt relief is much needed for the poorer countries. If we wait too long, it will be too late,” Mr Malpass said, calling for an end to non-disclosure agreements often demanded by China and other creditors, as well as clear rules for assessing and enforcing comparable treatment among all creditors.

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