David Malpass, the President of the World Bank, warned of an impending financial debt crisis. Malpass drew attention to the increasing debt stock in developing and newly industrializing countries.
Malpass stated that the developing and newly industrialized countries are financially “on the brink of an abyss. The enormous budget deficits and debt payments are overwhelming these economies. In addition, the banks there are getting into difficulties due to bad loans”.
He added that it was “very clear that these countries cannot pay some of their debts. We must, therefore, also reduce the debt level. This can be called debt relief or cancellation”.
According to DW Turkish, Malpass pointed to previous financial crises, such as in Latin America, and to the ‘Highly Indebted Poor Countries’ initiative for countries with unsustainable debts during the 1990’s.
Malpass criticized the role and acts of private banks and mutual funds: “Investors are not doing enough, I am disappointed with them. Some of the major lenders have also not got sufficiently involved”.
Malpass also warned against poverty and rising inequality around the world. He stated the pandemic could trigger another debt crisis, as some developing countries had already entered a downward spiral of weaker growth and financial instability. He observed that the coronavirus pandemic had destroyed the advances that had previously been achieved to address the problem of poverty. By 2021, he suggested that 150 million people could fall below the poverty line again.
The World Bank has allocated $12 billion in emergency aid for developing countries to make the projected Covid-19 vaccine accessible.