World Bank: ‘Fifth wave of debt crisis’ looms

World Bank Group President David Malpass warned Friday that the world is on the cusp of a “fifth wave of debt crisis,” calling for support for countries in difficulty.

The pandemic has prompted many countries to borrow more to support their economy, which now faces the risk of putting pressure on their debt, given the combined effect of inflation and rising interest rates.

“I am concerned about the level of debt, and I am concerned about a number of countries,” Malpass said at an online news conference.

The head of the World Bank Group emphasized that “in 2022 alone, debts owed to the private sector or countries amounted to $44 billion” in some of the poorest countries, an amount greater than the international aid received by these same countries. .

“We are currently facing what I believe is a fifth wave of the debt crisis,” he added, calling for “fundamentally more transparency” about debt levels, both on the part of lenders and borrowers.

The head of the World Bank Group was speaking ahead of the annual meetings of the International Monetary Fund and the meeting of the Group of Twenty financial groups, which will be held next week in Washington.

A call to help low-income countries

David Malpass once again took the opportunity to ask China, among the most important lenders to low-income countries, to communicate more about the amounts lent and to do more to allow for the most problematic debt restructuring.

His comments join warnings from International Monetary Fund chief Kristalina Georgieva, who on Thursday estimated nearly a quarter of emerging countries and up to 60 percent of the poorest countries are at risk of facing their debt crisis.

This situation is exacerbated by the slowdown in the global economy, with the combined effect of inflation fueled by higher energy and food prices and the tightening of monetary policy decided by central banks to curb inflation.

“Faced with the risks of the financial crisis in developing countries, it is very important to recognize the role that advanced economies play in terms of supporting growth,” said David Malpass.

He added that developing countries also need to see more capital flow into them, and even if the World Bank tries to increase your help, “it’s not enough.”

The World Bank maintains four previous waves of debt crisis since the 1970s, which most often led to financial crises in emerging and developing economies, such as the Asian crisis in the late 1990s.