World Bank looking to trim poor nations’ debt stock faster
Loading player...
Washington — The World Bank is looking at ways to reduce the amount of debt owed by poor countries — rather than simply delaying payments — to attract more investors in the wake of the global pandemic and recession, president David Malpass said.
The coming months and the annual meetings of the World Bank and International Monetary Fund in October present a good time horizon for action, Malpass said on Wednesday in a Bloomberg Television interview with Tom Keene. Malpass said he also sees an opportunity to extend relief under the Debt Service Suspension Initiative (DSSI) that started in May into 2021, an option that he believes will have support from the G-7 and G-20 leading economies.
“The next step is harder — agreement to actually do haircuts or writedowns,” Malpass said. “But that has happened in the past; for example in the 1980s in the Latin debt crisis, it got to the point of haircuts, but it took so long that the countries were in deep, deep trouble by the time that happened. So one of the things we’re trying to do is accelerate that so you can get to a good outcome sooner.”
At a July meeting, the G-20 said it will decide on extending the current debt-payment suspension closer to the end of the year, putting off assurances of additional relief as the coronavirus pandemic continues to burn about the world. Even with the G-20’s April agreement to waive bilateral debt payments from vulnerable countries, the cost of servicing obligations crowds out health and social expenses.
China is owed almost 60% of the money that the world’s poorest nations would be due to repay in 2020, according to World Bank data, and the nation has made many loans to developing countries with terms that are not transparent and at higher interest rates than the nations can afford, Malpass said. That highlights the importance of China’s participation in the debt relief, he said.
Many of the Chinese creditor agencies, including the Export-Import Bank of China, “are participating in the DSSI with the restructuring terms that other countries are using,” Malpass said. “Some of them are not, so that creates the challenge that we’re working on — by disclosing that.”
Bloomberg
The coming months and the annual meetings of the World Bank and International Monetary Fund in October present a good time horizon for action, Malpass said on Wednesday in a Bloomberg Television interview with Tom Keene. Malpass said he also sees an opportunity to extend relief under the Debt Service Suspension Initiative (DSSI) that started in May into 2021, an option that he believes will have support from the G-7 and G-20 leading economies.
“The next step is harder — agreement to actually do haircuts or writedowns,” Malpass said. “But that has happened in the past; for example in the 1980s in the Latin debt crisis, it got to the point of haircuts, but it took so long that the countries were in deep, deep trouble by the time that happened. So one of the things we’re trying to do is accelerate that so you can get to a good outcome sooner.”
At a July meeting, the G-20 said it will decide on extending the current debt-payment suspension closer to the end of the year, putting off assurances of additional relief as the coronavirus pandemic continues to burn about the world. Even with the G-20’s April agreement to waive bilateral debt payments from vulnerable countries, the cost of servicing obligations crowds out health and social expenses.
China is owed almost 60% of the money that the world’s poorest nations would be due to repay in 2020, according to World Bank data, and the nation has made many loans to developing countries with terms that are not transparent and at higher interest rates than the nations can afford, Malpass said. That highlights the importance of China’s participation in the debt relief, he said.
Many of the Chinese creditor agencies, including the Export-Import Bank of China, “are participating in the DSSI with the restructuring terms that other countries are using,” Malpass said. “Some of them are not, so that creates the challenge that we’re working on — by disclosing that.”
Bloomberg
