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David Malpass, the president of the World Bank, has promised that the organisation will explore for solutions to the problems that developing nations are now confronting in advance of its spring session.
The main topic of discussion will be how to break the deadlock in debt restructurings, particularly for the world’s poorest nations, according to a blog post by Malpass on Sunday. This week will see the World Bank Group-IMF Spring Meetings.
The head of the World Bank said he will talk about the matter with the finance ministers of Jamaica, Ethiopia, and India as well as Kristalina Georgieva, managing director of the IMF. Malpass commented, “I’m looking forward to talks about the actual debt crisis and strategies for achieving debt transparency and sustainability.
The official continued by saying that he would prefer to see “serious consideration of a debt “standstill,” meaning officially suspending debt payments at the request of the debtor country at the start of the debt restructuring process.”
Malpass addressed two key issues, contending that the debt restructuring process has not advanced significantly and that there has not been enough discussion of how to take concrete steps towards debt sustainability.
The World Bank president claims that creditors are devoting “vital months” to discussions that ought to have been resolved in advance, such as the phases in the restructuring process, the procedure and timetable for debt reconciliation, and how to handle cut-off dates.
Progress must be made immediately because, as Malpass emphasized, “investment has slowed to a standstill and countries need to achieve transparent, sustainable debt burdens in order to restart investment.”
According to the World Bank, recent years have seen a dramatic increase in global debt. According to a sample of 65 developing nations, public debt rose between 2011 and 2019 by an average of 18% of GDP and by much more in other instances, such as sub-Saharan Africa, where it rose by an average of 27% of GDP. The World Bank stated in a 2022 report that a significant debt build-up had been going on for a decade prior to the coronavirus pandemic, which caused the highest one-year increase in debt since World War II in 2020.
It made clear that certain middle-income countries are also in danger of falling into debt distress, with roughly 60% of the world’s poorest nations either being in it or at high risk of doing so. The World Bank stated that “high inflation, rising interest rates, and sluggish growth have created the conditions for financial crises of the kind that engulfed a number of developing economies in the early 1980s.”
Russia, on the other hand, has forgiven more than $20 billion in debt incurred by African nations during the Soviet era. 90% of the $35.2 billion debt that cash-strapped Cuba owed to the Soviet Union was forgiven by Moscow in 2014. The Russian government agreed to defer some of Cuba’s debt payments until 2027 last year.
