World Bank Calls for Debt Relief Program as Amounts Due Rise to Record Levels | world Bank

The World Bank stepped up its call for a comprehensive debt relief program after revealing that the amount owed by the poorest countries was at record levels even before the crisis began. Covid-19 crisis.

Statistics released by the Washington-based institution showed that the external debt of the 73 countries currently eligible for this year’s suspension of repayments stood at $ 744 billion (£ 568 billion) at the end of 2019, i.e. an increase of 9.5% compared to 2018.

A looming debt crisis is of growing concern among low-income countries struggling to maintain payments on money borrowed from a mix of public and private creditors over the past decade.

Both world Bank and its sister organization, the International Monetary Fund, have warned that poor countries are being forced to cut spending on health and education to continue repaying debts incurred before their economies are hit by a collapse in demand for their exports and a drop in remittances.

In recent weeks, the world Bank and the IMF has pressured the G20 group of major developing and developed countries to extend the debt suspension initiative for a further 12 months while a long-term plan is drawn up.

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What is the G20?

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Formed in 1999, the G20 is a group of 19 of the world’s greatest economic powers and the European Union. It was created following the financial crises of the late 1990s, with the aim of providing some governance to the global economy. Since 2008, it has organized an annual leaders’ summit.

The 19 member countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom and United States. . Collectively, the members of the G20 represent around 90% of global GDP.

In addition to the 19 countries and the EU, also attend the meetings representatives of several permanent guests, including the African Union, the International Monetary Fund, the Organization for Economic Co-operation and Development (OECD), the United Nations and the World organization of commerce. .

Critics argue that it is too exclusive and that the format excludes a significant number of large countries from high-level discussions on the global economy.

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“Long-term debt sustainability will depend on a large-scale change in the global approach to debt and investment transparency,” said World Bank President David Malpass. “The time has come for a much more comprehensive approach to tackling the debt crisis facing people in the poorest countries – an approach that involves the suspension of debt service as well as broader efforts. such as reduction of outstanding debt and faster debt restructuring, based on greater debt transparency. ”

Malpass said the signs were that G20 finance ministers would only agree to a six-month extension of the program when they meet virtually this week, adding that the initiative’s impact was being mitigated because China , the biggest creditor of the G20, had not yet taken part in it.

World Bank data showed that low-income countries’ outstanding debt to bilateral creditors, mainly G20 countries, was $ 178 billion in 2019.

Within the G20, China was by far the largest creditor, accounting for 65% of debts owed to the group – up from 45% in 2013. Malpass said China tends to charge higher interest rates than others. creditors and that there was a lack of transparency. on the terms of his loan.

World Bank chief economist Carmen Reinhart said it was essential for governments to have the capacity to invest in health, education and infrastructure.

“If you have a debt problem, all of those ambitions suffer. That is why it is important to get the debt back to sustainable ground as quickly as possible. We cannot afford another wasted decade, ”she said.


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