Many nations were compelled to increase their debt due to the pandemic, and the World Bank and International Monetary Fund have warned that many of these nations are either experiencing or are about to experience debt difficulty due to rising interest rates and soaring global inflation.
David Malpass President of World Bank told reporters,
I’m worried about the debt levels and worried about the individual countries. In some of the world’s most impoverished nations, approximately $44 billion in debt service payments from bilateral and private debt services have become due, larger than the foreign aid flows the countries might hope for. What I believe to be a fifth wave of the debt crisis is currently underway.
Malpass, speaking just days before the annual meetings of the IMF and World Bank in Washington, urged for “radically increased transparency” on debt levels from creditors and debtors.
He has long demanded that China, a significant creditor to low-income countries, be more transparent about its lending practices and more involved in attempts to restructure debt, a process that has had difficulty gaining pace.
His remarks come at a difficult moment for the world economy, which is dealing with rising interest rates and surging inflation that threaten to have an impact throughout the world and derail nascent recoveries.
However, officials argue that allowing high inflation to take root would be even worse. Some observers have warned that aggressive interest rate rises by major economies might trigger a global recession.
“As we face these financial problems in the developing world, we must understand the paramount significance of the advanced economies in terms of restoring development and transitioning to a quicker growth environment,” Malpass said.
The World Bank is increasing its assistance to countries, but it is “just not enough,” according to him, and developing countries also require additional capital flows. According to the World Bank, the global economy has seen four waves of debt accumulation since 1970, each of which has resulted in financial crises in many emerging and developing economies.