The World Bank warns the G20 against doing too little to tackle debt problems

WASHINGTON (Reuters) – World Bank President David Malpass on Saturday warned G20 leaders that failing to deliver more permanent debt relief to some countries now could lead to increased poverty and a repeat of the disorderly defaults of the years’ 80.

Malpass said he was satisfied with the progress made by the Group of 20 major economies in increasing debt transparency and providing debt relief to the poorest countries, but more was needed.

“Debt relief and transparency will enable productive investment, a key to achieving a faster, stronger and longer lasting recovery,” Malpass told G20 leaders at a videoconference meeting.

“We have to be careful not to do too little now, and then suffer from messy delinquencies and repeated debt restructuring like in the 1980s,” he said.

The so-called “lost decade” of the 1980s saw many highly indebted countries in Latin America and elsewhere unable to pay their debts, retarding growth and efforts to reduce poverty.

Malpass, who began pushing for debt cancellation at the start of the COVID-19 crisis, warned that debt challenges were becoming more frequent, including in Chad, Angola, Ethiopia and Zambia, and the inability to provide “a more permanent debt relief” has left a bleak prospect for reducing poverty.

G20 leaders stand ready to formally endorse the extension of a temporary freeze on official bilateral debt payments by poorer countries and the adoption of a common framework for debt restructuring in the future.

Some countries, including China, have remained reluctant to embrace the need for debt cancellation, although top economists say it will likely be necessary in some cases. Private sector creditors also failed to participate, despite repeated appeals from G20 leaders, civil society groups and the United Nations.

Malpass said the Bank is working closely with the G20 in countries affected by fragility, conflict and violence, including the Sahel, Somalia, Lebanon, Gaza and the West Bank.

In Sudan, he said he hoped the settlement of arrears could proceed quickly, especially given the influx of refugees from neighboring Ethiopia, which would allow massive World Bank funding to start flowing almost immediately.

Last month the United States moved to remove Sudan from the list of state sponsors of terrorism, removing one of the obstacles facing the heavily indebted African country, which has about $ 60 billion in foreign debt.