The world is facing a “fifth wave of the debt crisis,” World Bank (WB) President David Malpass warned on Friday, calling for support for struggling countries.
The pandemic has pushed many countries to borrow more to prop up their economies and now face the risk of their debt straining from the combined effect of inflation and rising interest rates.
“More transparency”
“I’m concerned about the level of debt, concerned about a number of countries,” Malpass told an online news conference. “In 2022 alone, some of the poorest countries will have matured some $44 billion in debt held by the private sector or other governments,” an amount greater than the international aid received by the same countries World Bank.
“We are currently facing what I believe is a fifth wave of the debt crisis,” he added, calling for “radically more transparency” on debt levels, from both lenders and borrowers.
Call to China
The World Bank President was addressing the annual meeting of the International Monetary Fund (IMF) and a G20 finance meeting to be held in Washington next week.
David Malpass took the opportunity to once again urge China, one of the top lenders to low-income countries, to communicate more about the loan amounts and to do more to facilitate the restructuring of the most problematic debts.
His comments follow warnings from IMF Managing Director Kristalina Georgieva, who on Thursday estimated that nearly a quarter of emerging economies and up to 60% of the poorest countries are at risk of a debt crisis.
Explosive cocktail for business
A situation exacerbated by the slowdown in the global economy under the combined effect of inflation fed by the rise in energy and food prices and the monetary tightening decided by central banks to limit the latter.
“Given the risk of a financial crisis in developing countries, it is very important to recognize the role that advanced economies play in supporting growth,” said David Malpass. “Developing countries also need to see more capital flowing into them,” and even if the WB tries to increase its aid, “it’s just not enough,” he added.
The World Bank records four previous debt crises since the 1970s that most often led to financial crises in emerging and developing countries, such as the Asian crisis in the late 1990s.