World Bank warns against ignoring debt

Delays in dealing with the growing debt burden in poor countries seems unlikely to be resolved by the G20, a top World Bank official warned.As interest rates are starting to rise around the world, putting more pressure on borrowers, the Group of 20 finance ministers are due to meet in Indonesia this week.But World Bank chief economist Carmen Reinhart is skeptical there will be a resolution soon to help address unsustainable debts."The stalling is really, really problematic," she told AFP in an interview. She warned that the average length of a government debt crisis is nine years, which would create a "lost decade" for already vulnerable countries.During the Covid-19 pandemic the G20 put in place a debt service suspension initiative to help countries as they ramped up borrowing to deal with the twin health and economic crises, but that program ended in December.And the so-called common framework meant to offer a way to restructure large debt loads, remains subject to uncertainty, and only three countries Chad, Ethiopia and Zambia have requested a negotiation.The problem, Reinhart said, is "These little countries are not systemic. They not going to make or break the global outlook."So unfortunately, it means they can easily slip into backburner territory and remain on the backburner."PovertyAdvanced economies offered debt forbearance to help countries that already had high poverty and low per capita income, deal with the pandemic, but she said "the damage is still ongoing."Asked if she expected another push to deal with the debt issue at the G20 this week, the official said, "I hope that they do. But I am not optimistic."In its World Development Report released Tuesday, the global lender again flagged the issue of hidden debt vulnerabilities, due to rising private sector debt during the pandemic as well as lack of transparency around lending, especially by China."It's not the things that you see that get you, it's what you don't see," Reinhart said, noting the lack of information on "hidden non-performing loans."The World Bank report urges policymakers in debtor countries to deal with the pressing economic risks, dealing with bad loans quickly to shore up their financial systems, as well as addressing high government debt.That is more urgent since rising prices globally have prompted major central banks to begin raising interest rates. And the US Federal Reserve is expected to do so next month. -AFP

World Bank warns against ignoring debt

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Republikein 2025-06-27

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World Bank warns against ignoring debt

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