World Bank hopes to cut down debts of poor countries rather than delay payments
President of the World Bank Group, David Malpass, disclosed this during an interview with Bloomberg Television earlier today.
The World Bank Chief disclosed during the interview that the coming months and the annual meetings of the World Bank and the International Monetary Fund (IMF) in October present a good timeframe for action.
He also stated that he sees an opportunity to extend relief under the Debt Service Suspension Initiative that started in May and will extend into 2021, an option that he believes will receive support from the G7 Group and Group of 20 leading economies.
“The next step is harder agreement to actually do haircuts or write-downs. But that has happened in the past, for example, in the 1980s in the Latin debt crisis, it got to the point of haircuts, but it took so long that the countries were in deep, deep trouble by the time that happened. So one of the things we’re trying to do is accelerate that so you can get to a good outcome sooner,” Malpass said.
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The G-20 countries, during a meeting in July, agreed to extend the current debt payment suspension towards the end of the year, putting off assurances of additional relief as the coronavirus pandemic continues to cause global damage. Even the G-20 April agreement to give up bilateral debt payments from vulnerable countries, the cost of servicing the debts outweighs health and social expenses.
Nairametrics had reported about 2 months ago, the announcement of plans by China to exempt some African countries from loan repayment especially zero interest rate loans that are due by the end of the year. The initiative was a follow up to the earlier one by the G-20 leading economies to suspend payments for low-income countries that are in deep economic crisis due to the Covid-19 disease.
According to the World Bank’s data, China is owed about 60% of the money that the World’s poorest countries are expected to repay this year.
The World Bank President said that a lot of the Chinese creditor agencies, including the Export-Import Bank of China, are participating in the Debt Service Suspension Initiative with the restructuring terms that other countries are using. He, however, said that some of them are not using that and so, that creates the challenge that they are working on.