The World Bank chief called for a more ambitious debt relief plan for poor countries after warning that the Covid-19 recession turns into depression in the most difficult regions of the globe.
In an interview with The Guardian, David Malpass raised the prospect of the first systematic debt write-off since the Gleneagles deal of 2005, when he said new Bank figures due next month would show $ 100 million. more people had been pushed into poverty by the crisis.
Poor countries had been hit harder by the economic fallout from Covid-19, Malpass added, and a growing debt crisis meant there was a need to go beyond the repayment holidays offered by rich countries more early this year.
“It’s worse than the financial crisis of 2008 and for Latin America worse than the debt crisis of the 1980s,” said the world Bank said the president.
“The immediate problem is that of poverty. There are people on the brink. We have made progress over the past 20 years. Entire populations have emerged from extreme poverty. The risk of the economic crisis setting in is that people will fall back into extreme poverty. “
Malpass added: “As the crisis hit, inequalities have become very marked. The recovery in advanced countries has been targeted on advanced countries, as a major problem of inequality has worsened. Recessions are even worse in developing countries than in advanced economies. “
Debt problems were escalating, Malpass said, because while the gross domestic product of poor countries declined, the amount they owed was not.
The World Bank president said he was happy to see the industrialized G7 countries consider extending the debt repayment holidays due to end this year in 2021, but said a more radical approach was needed. .
“Even before the pandemic, we noted over-indebtedness in many countries. There has been a huge increase in the amount of debt in poor countries and in the developing world, in part caused by the hunt for yield.
“For heavily indebted countries, we need to look at the stock of debt,” said Malpass. “So far we’ve given debt service relief, but then added what hasn’t been paid at the end. “
Malpass said the terms under which countries borrow needed to be more transparent and said it was important for the agreements to include creditors who had so far not taken part in the debt agreements, such as private sector investors and the Development Bank of China.
“There is a risk of free riding, where private investors are paid in full, in part thanks to the savings countries receive from their official creditors. This is not fair to the taxpayers of countries providing development assistance and means that poor countries do not have the resources to deal with the humanitarian crisis ”.
Malpass said the Bank has mobilized $ 160 billion for loans and grants to relieve the immediate strain on health systems, the increase in the number of out-of-school children, the loss of income for those working in the informal economy and the threat of hunger. The total cost of strengthening infrastructure in developing countries, improving health and education systems, and weaning poor countries off fossil fuels would run into the trillions of dollars.
“The recession has turned into a depression for some countries,” said Malpass, adding: “It is the biggest crisis in decades, but I am fundamentally optimistic that people who work together will find a way through it.” .
The World Bank president said the prospect of people going hungry was “of grave concern”, noting the threat to food security as the year progressed.
Decent harvests and food imports currently averted the threat of famine, but Malpass said: “While there is no problem of food shortage now, if the situation continues it could become one.”
Malpass said it was a “huge tragedy” that the crisis had prevented many children in poor countries from going to school. “It’s pretty clear. When children do not go to school, they lose some of what they have already learned ”.
Reduced access to schools means some countries are backing down on education, he added, with ripple effects on the physical protection of young girls for whom there is an increased risk of marrying a youngster. age.