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The most recent report of the World Bank, issued during the annual meetings that the organization holds in conjunction with the International Monetary Fund (IMF), indicates that the resulting debt of the world’s low-income countries increased by 12%. That is, a record figure of 860,000 million dollars. The document maintains that this situation is a consequence of the Covid-19 outbreak and the plans taken by some governments to mitigate the effects of the pandemic.
The situation, considered a “tragic setback” by the multilateral organization, comes after the nations established massive fiscal, monetary and financial stimulus packages with the aim of addressing the health emergency, at first; cushioning the impact of the health crisis on the poor and vulnerable and, ultimately, putting countries on the road to recovery.
The document points out that before the pandemic, many countries were in a vulnerable situation, mainly due to a slowdown in economic growth and high public and external debt.
All of the foregoing resulted in pressure on the resulting debt burden in several of these countries.
“We need a comprehensive approach to the debt problem, including debt reduction, faster restructuring and greater transparency … Sustainable debt levels are vital for economic recovery and poverty reduction,” said David Malpass, President of the World Bank Group.
Additionally, the World Bank notes that the external debt balance of low- and middle-income countries combined increased 5.3% in 2020 to $ 8.7 trillion. “The deterioration in debt indicators was generalized and affected countries in all regions,” reads part of the statement issued by the agency.
Kristalina Georgieva: “we need coordinated action”
For her part, Kristalina Georgieva, managing director of the International Monetary Fund, said on October 11 that coordinated action is necessary to stop and begin to reverse the accumulation of vulnerable countries.
“We must be humbled in recognizing that the world of weak states is expanding, and if we do not commit all of our forces together, we will not stop or reverse this path,” he said.
Georgieva expressed her position to a panel during the fall meetings of the International Monetary Fund and the World Bank, adding that the Covid-19 pandemic has exacerbated problems in countries that were already more vulnerable to problems such as extreme poverty, drought, etc. high food prices and, in some cases, war.
Finally, the highest authority of the IMF thanked the support given by the board of directors of the organization in relation to the accusations against him for the alleged pressure carried out on other officials of the World Bank, while he was working in the institution, to alter the rating of China in the ‘Doing Business’ report.
With EFE and Reuters
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