WASHINGTON: World Bank President David Malpass on Saturday warned G20 leaders that failing to provide more permanent debt relief to some countries now could lead to increased poverty and a repeat of the disorderly defaults seen in the 1980s.
Malpass said he was pleased by progress made by the Group of 20 major economies on increasing debt transparency and providing debt relief to the poorest countries, but more was needed.
“Debt reduction and transparency will enable productive investment, a key to achieving an earlier, stronger and more lasting recovery,” Malpass told G20 leaders during a videoconference meeting.
“We need to guard against doing too little now, and then suffering disorderly defaults and repeated debt restructurings as 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, delaying growth and efforts to reduce poverty.
Malpass, who began pushing for debt relief early in the COVID-19 crisis, warned that debt challenges were becoming more frequent, including in Chad, Angola, Ethiopia and Zambia, and failure to provide “more permanent debt relief” left a bleak outlook for reducing poverty.
G20 leaders are poised to formally endorse extension of a temporary freeze in official bilateral debt payments by the poorest countries, and adoption of a common framework for debt restructuring in the future.