WASHINGTON (Reuters) – World Bank President David Malpass on Saturday warned G20 leaders that failure to provide more permanent debt relief to some countries could lead to increased poverty and a repeat of disorderly defaults observed in the 1980s.
Malpass said he was satisfied with the progress made by the Group of 20 major economies on increasing debt transparency and providing debt relief to the poorest countries, but more was needed.
“Debt reduction and transparency will enable productive investments, a key to achieving a faster, stronger and more sustainable recovery,” Malpass told G20 leaders in a meeting via video conference.
“We must beware of doing too little now and then enduring disorderly defaults and repeated debt restructurings like in the 1980s,” he said.
The so-called “lost decade” of the 1980s saw many heavily indebted countries in Latin America and elsewhere unable to pay their debts, stunting growth and efforts to reduce poverty.
Malpass, who began pushing for debt relief at the onset of the COVID-19 crisis, warned that debt problems were becoming more prevalent, including in Chad, Angola, Ethiopia and Zambia, and that the failure to provide “more permanent debt relief” left bleak prospects for poverty reduction.
G20 leaders are set to formally approve the extension of a temporary freeze on official bilateral debt payments by the poorest countries, and the adoption of a common framework for debt restructuring to the future.
Some countries, including China, have remained reluctant to accept the need for debt cancellation, although top economists say it will likely be necessary in some cases. Private sector creditors also did not participate, despite repeated calls from G20 leaders, civil society groups and the United Nations.
Malpass said the Bank is working closely with the G20 in countries affected by fragility, conflict and violence, including the Sahel, Somalia, Lebanon, Gaza and the West Bank.
In Sudan, he said he hoped that arrears clearance could be done quickly, especially given the influx of refugees from neighboring Ethiopia, which would allow substantial funding from the World Bank. to start pouring in almost immediately.
The United States decided last month to remove Sudan from its list of states that sponsor terrorism, removing one of the obstacles facing the heavily indebted African country, which has some $ 60 billion in foreign debt. .
Reporting by Andrea Shalal; Editing by Daniel Wallis and Diane Craft