a “fifth wave of debt crisis” is in sight

The pandemic has prompted many countries to borrow more to support their economies.

The world is about to face a “Fifth wave of debt crisis”, World Bank (WB) President David Malpass warned Friday, calling for support for troubled countries. The pandemic has prompted many countries to borrow more to support their economies, which are now at risk of putting pressure on their debt, under the combined effect of inflation and rising interest rates.

“I am concerned about the level of debt, concerned about some countriessaid David Malpass during an online press conference. “In 2022 alone, approximately $44 billion in debt, whether owned by the private sector or other states, was made duein some of the poorest countries, an amount greater than the international aid that these same countries have received, the president of the World Bank underlined. “We are currently facing what I believe to be a fifth wave of debt crisis”he added, calling out: “radically more transparency” on debt levels, both on the part of lenders and borrowers.

The president of the World Bank spoke ahead of the annual meetings of the International Monetary Fund (IMF) and a meeting of the G20 finances, which will take place next week in Washington. David Malpass took the opportunity to again ask China, one of the main lenders to low-income countries, to communicate more about the amounts lent and to do more to facilitate the restructuring of the most problematic debts.

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Global economic downturn

His comments echo the warnings of the IMF director, Kristalina Georgieva, who on Thursday estimated that nearly a quarter of emerging countries and up to 60% of the poorest countries are at risk of facing a debt crisis. A situation that is exacerbated by the slowdown in the global economy, under the combined effect of inflation, fueled by the rise in energy and food prices, and by the monetary tightening that the central banks have decided to limit the latter.

“Faced with the risk of a financial crisis in developing countries, it is very important to recognize the role advanced economies play in supporting growth”, David Malpass recalled. Developing countries also need to see more capital flowing to them and, even if the World Bank tries to increase your aid, “it’s just not enough”, he added. The World Bank is sticking to four previous waves of debt crisis since the 1970s, mostly resulting in financial crises in emerging and developing economies, such as the Asian crisis of the late 1990s.