Global debt grew considerably in 2021, China leading lender: World Bank president

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In 2021, the amount of debt among the low- and middle-income countries “grew substantially”, said World Bank President David Malpass during an interview with Reuters on Friday. This comes ahead of the bank’s upcoming yearly report on global debt which Malpass says will make clear that private sector creditors also need to participate in debt reductions. 

According to the World Bank president, China accounts for nearly 66 per cent of lending in the total for the official bilateral creditors. This also makes Beijing the world’s biggest official bilateral creditor. Meanwhile, he also talked about how the implementation of the common framework created by the G20 economies as well as the Paris Club of official creditors in late 2020 for debt treatments has been halted. 

In this context, he gave the example of the African nation, Chad, whose bilateral creditors are countries like China, France, India and Saudi Arabia and also private creditors like Switzerland-based Glencore which reportedly reached an agreement on the country’s nearly $3 billion in external debt. However, Malpass says that it does not account for longer-term debt sustainability as it forgoes any actual debt reduction. 

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He also said that the World Bank, the International Monetary Fund (IMF) and Western officials have repeatedly criticised China as well as private sector lenders for not moving forward with their plan at a faster pace. Therefore, the World Bank president said that the overall debt issue will be one of the highlights of the upcoming meeting of the G20 leaders. 

Malpass also called for an increased pace of debt restructuring for both Chad and Zambia with the latter being the first to make the request under the new common framework. He added that the longer the process of enacting real debt reductions is, it will become increasingly difficult for these countries to “get back on their feet.” 

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This comes as Malpass warns about the bank’s forthcoming International Debt Statistics report, which he reportedly said was troubling but did not give any specific numbers or statistics on the same.  

But the preliminary data released by the World Bank in June hints at the worsening situation as it showed that the external debt stock of low- and middle-income countries on average rose 6.9 per cent in 2021 to $9.3 trillion which is a 1.3 per cent growth witnessed since 2020. “The report makes clear that debt reduction needs to extend broadly to include the private sector and China,” said Malpass. 

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Furthermore, the officials at World Bank and IMF have also said that at least 25 per cent of emerging markets and developing economies are in or near debt stress, while the number for low- and middle-income countries is at a staggering 60 per cent. This comes amid climate shocks, inflation, rise in interest rates which increased the pressure on countries still reeling from the Covid-19 pandemic. 



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