March 1, 2024

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World Bank: A “Fifth Debt Crisis” is in sight

World Bank: A "Fifth Debt Crisis" is in sight

The world is facing a “fifth wave of debt crisis”, World Bank (WB) President David Malpass warned on Friday to support struggling countries.

The combined effect of the pandemic is inflation and rising interest rates that have forced many countries, which now face the risk of stressing their debt, to borrow more to support their economies.

“I’m worried about the level of debt, I’m worried about many countries,” Malpas said at an online news conference.

“In 2022 alone, some $44 billion in debt owed by the private sector or other states will have to be paid off in some poor countries”, more than the amount of international aid these same countries receive. The country, the president emphasized. WB.

“I think we’re in the fifth wave of the debt crisis right now,” he added, calling for “drastically more transparency” on debt levels from lenders and borrowers.

The World Bank president was speaking ahead of the International Monetary Fund (IMF) annual meetings and the G20 finance meeting in Washington next week.

David Malpass took the opportunity to again ask China, one of the most important creditors to low-income countries, to communicate more about the amounts it has lent and to do more to allow for the restructuring of its most troubled debts.

His comments were joined by warnings issued by IMF Managing Director Kristalina Georgieva, who estimated that nearly a quarter of developing countries and up to 60% of poor countries are at risk of facing a crisis of their debt.

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The situation is exacerbated by the slowdown in the global economy, with the combined effect of inflation, rising fuel and food prices, as well as monetary tightening by central banks to limit the latter.

“When facing the risk of a financial crisis in developing countries, it is 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 while the WB has tried to increase its aid, “it’s not enough,” he added.

The WB has weathered four previous debt crises since the 1970s, most often leading to financial crises in emerging and developing economies, such as the Asian crisis of the late 1990s.

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