The World Bank warned Monday about a significant 12 percent increase in the debt burden of the world’s low-income countries to $860 billion in 2020 due to the COVID-19 pandemic. The World Bank calls for immediate efforts to reduce debt levels.
World Bank President David Malpass told reporters that the bank’s 2022 International Debt Statistics show a dramatic rise in the debt vulnerabilities facing low- and middle-income countries. He also urged comprehensive efforts to help countries achieve debt levels at safe levels.
“We need a comprehensive approach to debt issues, including debt reduction, faster restructuring and increased transparency,” Malpass said in a statement accompanying the bank’s new report.
He said half of the world’s poorest countries face foreign debt difficulties or are at high risk of doing so.
Malpass said safe levels of debt were needed to help countries achieve economic recovery and reduce poverty.
The report said the external debt of low- and middle-income countries rose 5.3 percent in 2020 to 8.7 trillion dollars, affecting countries in all regions.
It also stated that the increase in foreign debt outpaced gross national income (GNP) and export growth, with the ratio of external debt to PB, excluding China, rising five percent to 42 percent in 2020, while the debt-to-export ratio jumped to 154 percent. in 2020 from 126 percent in 2019.
Malpass said debt restructuring efforts were urgently needed given the end of the Debt Service Suspension Initiative (DSSI) of the major G20 member economies at the end of this year. DSSI offers a temporary suspension of debt payments. [uh/ab]