CAIRO (Reuters) – The debt situation for poor countries could worsen due to volatile commodity prices and higher interest rates, World Bank President David Malpass said on Thursday, urging countries to begin a gradual fiscal consolidation to maintain investor confidence.
As of mid-2021, over half of the world’s poorest countries “are in external debt distress, or at risk of it,” Malpass said in a speech from the Sudanese capital, Khartoum, ahead of World Bank and International Monetary Fund annual meetings in mid-October.
“When the debt service suspension or DSSI initiative expires at the end of this year, low income countries that resume debt service payments will see their fiscal space shrink,” Malpass said limiting their ability to buy vaccines and finance other priorities.
Malpass repeated his call for accelerated cooperation to implement a G20 debt restructuring framework for poor countries, including from the private sector, which has failed thus far to extend forbearance to sovereign borrowers.
“It’s time to pursue a gradual and people-oriented fiscal consolidation, and to restructure unsustainable debt,” Malpass said, adding that countries should.
At the same time, countries should seek to reprofile their debt payments while international interest rates remain low, while eliminating wasteful spending.
Malpass also called for an increased scale of development efforts to help economies rebuild from the COVID-19 pandemic.
“To achieve impact, we need education, nutrition and vaccination programs that reach hundreds of millions of children. We need digital cash transfer programs that can provide necessary resources to billions of people in the next crisis,” Malpass said.
“In response to climate change, we need thousands of large public-private projects that combine the world’s resources from governments, MDBs (multilateral development banks) foundations, private investors and the buyers of carbon credits.”
Malpass, who met earlier with Sudanese Prime Minister Abdalla Hamdok, said Sudan is making progress as it reconnects with the global economy but patience is needed as the country seeks to tackle shortages and attract investment.
(Reporting by David Lawder and Aidan Lewis; Editing by Alison Williams and David Evans)
