The World Bank calls for restructuring the debt of poor countries

World Bank President David Malpass on Saturday called on G20 leaders to accelerate work on debt restructuring in low-income nations, including a payment freeze and mandatory involvement of private creditors.

Malpass told the G20 leaders meeting in Rome that progress in managing the debt of the poorest countries has stalled and urgent efforts are needed to push the process forward.

World leaders pledged to intensify their efforts to implement the Common Debt Treatment Framework, but did not include anything about implementing a new debt suspension, according to the text of their statement accessed by Reuters.

Several countries oppose suspension of payments

Some countries, including China, the world’s largest creditor accounting for 65% of official bilateral debt, have opposed a new freeze on debt service payments.

Malpass, who this month called for adding a freeze on debt service payments to the Common Framework, said developing nations face problems that disrupt economic recovery, including the Covid-19 pandemic and vaccine shortages, inflation. , power shortages and a supply chain collapse.

The multiple problems are causing devastating setbacks in development, ”said Malpass.

One of their arguments was that the debt of low-income countries increased 12% during the pandemic, reducing their ability to invest in anything else.

“Progress on debt has stalled,” Malpass said. “I urge you to accelerate the implementation of the Common Framework, request transparency and debt reconciliation, and demand the participation of private creditors.”

Malpass said that the managing director of the International Monetary Fund, Kristalina Georgieva, is also in favor of suspending the debt, but additional measures are needed to balance the legal relationship between creditors and sovereign debtors.