A high-ranking official from the World Bank has stated that China has the power to accelerate debt relief and put an end to the “silent crisis” that is hindering efforts to address poverty in the most impoverished nations.
The Deputy Chief Economist of the Bank, Ayhan Kose, stated that Beijing should take a more proactive role in talks to offer financial aid to countries that are already in or nearing debt crisis.
According to Kose, China’s rise as a major creditor nation in the last 15 years requires it to take on the responsibility of implementing an effective debt relief system after the pandemic.
According to Kose, it is important for China to take a more proactive role. In terms of debt relief, China holds significant influence and is a key player in the situation.
The World Bank and its counterpart, the International Monetary Fund, are becoming more worried about the impact of the pandemic and rising interest rates on low-income countries. Currently, 11 countries are facing financial difficulties and 28 others are at risk of facing similar challenges.
The Common Framework, created by the G20 in 2020, aims to offer debt relief to countries individually. Currently, only a few nations have received financial assistance through this program.
According to Kose, underdeveloped nations face difficulties in accessing loans from international financial markets and are not receiving assistance with their debt. This leads to a dilemma where they must reduce investments in education and healthcare, resulting in regression. This goes against the desired outcome and only exacerbates the ongoing crisis.
According to a representative from the World Bank, the issue of debt is a “silent crisis” that is not typically highlighted in TV news and has not led to any major countries defaulting. However, the majority of debtors are smaller nations, many of which are facing economic difficulties worsened by conflicts, but these countries only make up 16% of the world’s population.
Kose stated that a significant portion (40%) of low-income countries will experience a decrease in their per capita income by the end of this year compared to 2019. He expressed concern that the lack of action on debt relief will hinder development and have negative consequences for the international community.
Since the establishment of the Common Framework, four nations have requested assistance, but only two (Chad and Zambia) have come to an agreement.
Kose suggested that instead of pursuing a “grand scheme” like the heavily indebted poor country initiative introduced by the Bank and the IMF in 1996, the international community should focus on improving the effectiveness of the Common Framework.
“We need to be honest about the severity of the issue and determine necessary actions and potential ramifications if countries remain in a state of debt paralysis for an extended period,” he stated.
Source: theguardian.com
