WASHINGTON : World Bank Chief Economist Indermit Gill is calling for new approaches to address the mounting debt crisis facing many countries, including steps to factor domestic borrowing into assessment of a country’s debt sustainability.
Gill told Reuters the Common
Framework set up by the Group of 20 major economies to help the poorest countries had resulted in only glacial progress because it did not account for 61 per cent of developing countries’ external debt held by private creditors, a far larger share than decades ago.
Only four countries – Zambia, Chad, Ethiopia and Ghana – have applied for relief under the G20 mechanism set up in late 2020 at the height of the COVID-19 pandemic, although the International Monetary Fund estimates that many more – 60 per cent of low-income countries – are in or at high risk of debt distress.
Only Chad has reached a debt relief deal with creditors – and it does not include an actual reduction in debt.
Rising interest rates in the United States and other advanced economies would keep money flowing out of emerging markets for some time, just as in the 1980s, and that, Gill said in an interview this week, would result in “more train wrecks.”
“Debt levels are already starting to hurt prospects, getting them into the wrong kind of spiral,” he said ahead of a World Bank seminar on debt on Wednesday. “Many of these countries are in debt crisis already. A country like Egypt is under water.”
Source: Reuters
