World Bank: a “fifth wave of debt crisis” is in sight

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The world is about to face a “fifth wave of debt crisis”, World Bank (WB) President David Malpass warned on Friday, calling for a support for countries in difficulty. 

The pandemic has prompted many countries to borrow more to support their economy, now facing the risk of strain on their debt, under the combined effect of inflation and rising interest rates.

“I am worried about the level of debt, worried about a number of countries,” Malpass told an online press conference.

“Nothing but “In 2022, about $44 billion of debt, held by the private sector or other states, has become due” in some of the poorest countries, an amount greater than the international aid received by these same countries, has underlined the president of the WB.

“We are currently facing what I think is a fifth wave of debt crisis,” he added, calling for “drastically more transparency” on debt levels, both from lenders and borrowers.

The President of the World Bank was speaking ahead of the annual meetings of the International Monetary Fund (IMF) and a meeting of the G20 finance, which will be held next week in Washington.< /p>

A call for help for low-income countries

David Malpass took the opportunity to once again ask China, one of the most important lenders to low-income countries, to communicate more about the amounts lent and to do more in order to allow the restructuring of the most problematic debts.

His remarks join the alerts issued by the managing director of the IMF, Kristalina Georgieva, who estimated Thursday that nearly a quarter of emerging countries and up to 60% of the poorest countries risk being confronted with a crisis of their indebtedness.

A situation amplified by the slowdown in the global economy, under the combined effect of inflation, fueled by the rise in energy and food prices, as well as monetary tightening decided by central banks to limit the latter.

“Faced with the risk of 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.

Developing countries also need to see more capital flowing into them and, even if the WB tries to increase your aid, “it's just not not enough,” he added.

The WB retains four previous waves debt crisis since the 1970s, most often leading to financial crises in emerging and developing economies, such as the Asian crisis of the late 1990s.