A senior official from the World Bank has stated that China has the power to accelerate debt relief and put an end to the “silent crisis” hindering efforts to address poverty in the most impoverished nations.
According to Ayhan Kose, the deputy chief economist of the Bank, Beijing should take a more proactive approach in negotiations to offer financial assistance to countries that are currently facing or in danger of facing debt issues.
Kose stated that China’s rise as a major creditor nation in the last 15 years requires it to be accountable for ensuring the success of a debt relief system in a post-pandemic world.
According to Kose, China should take a more proactive stance. China holds significant influence in the area of debt relief and is a crucial player.
The World Bank and the International Monetary Fund, both related organizations, have become increasingly worried about the impact of the pandemic and rising interest rates on low-income countries. Currently, 11 countries are experiencing financial difficulties, and an additional 28 are at significant risk of facing similar challenges.
To date, only a limited amount of nations have received financial assistance through the Common Framework. This program was created by the G20, a group of both developed and developing countries, in 2020 to offer debt relief on an individual country level.
According to Kose, underprivileged nations are unable to obtain loans from international financial markets and are not receiving assistance with their debts. As a result, their only option is to reduce investments in education and healthcare, causing a decline in progress. This goes against the desired outcome and only worsens the situation, making the crisis an ongoing issue.
According to a representative from the World Bank, the issue of debt is often overlooked in the media and has been described as a “silent crisis”. So far, no major country has defaulted on their debt, but it is primarily smaller countries that are facing this issue. These countries, which make up 16% of the world’s population, often have additional economic challenges due to ongoing conflicts.
Kose stated that in 2020, 40% of impoverished nations will experience a decrease in per capita income compared to 2019. He expressed concern that the lack of debt relief is hindering progress and will have a negative impact on the world as a whole.
The Common Framework has received requests for assistance from four nations, but only two – Chad and Zambia – have successfully negotiated an agreement.
Kose stated that instead of pursuing a large-scale plan like the 1996 heavily indebted poor country initiative, the global community should focus on improving the effectiveness of the Common Framework.
“However, we must be honest about the severity of the issue and determine the necessary actions and potential repercussions if countries remain in a state of debt paralysis for an extended period,” he stated.
Source: theguardian.com
