The COVID-19 crisis may push 100 million people into extreme poverty worldwide, more than previously estimated, World Bank President David Malpass warned on Thursday in an interview with ..
The Washington-based development institution estimates that between 70 million and 100 million people could fall into extreme poverty, and “that number could rise” if the pandemic worsens or lasts longer, he said. The previous estimate was 60 million people.
Malpass said the deterioration is due to a combination of job losses during the health crisis and supply problems that hinder access to food.
“All this contributes to that people fall back into extreme poverty the longer the economic crisis persists,” he explained.
The WB has pledged to allocate $ 160 billion in financing to 100 countries through June 2021 in an effort to address the immediate emergency, but even so extreme poverty, defined as earning less than $ 1.90 a day, continues to grow .
The situation makes it “imperative” for creditors to reduce the amount of debt of poor countries at risk, beyond the commitment to suspend debt payments, Malpass said.
Still, more countries will be forced to restructure their liabilities.
“The vulnerabilities of the debt are high and the imperative to obtain light at the end of the tunnel so that new investors can enter is substantial,” Malpass said.
– Recession or depression? –
The advanced economies of the Group of 20 (G20) have already pledged to suspend the debt payments of the poorest nations until the end of the year, and there is growing support to extend that moratorium in 2021, amid a pandemic that it has killed nearly 800,000 people and sickened more than 25 million worldwide.
But Malpass said it won’t be enough, as the recession means those countries, already struggling to provide respite for their citizens, will not be in a better position to meet the payments.
How much it is necessary to reduce debt will depend on the situation in each country, he explained. “I think there will be a gradual awareness of this,” especially “in countries most vulnerable to the debt situation.”
The new WB chief economist Carmen Reinhart called the economic crisis a “pandemic depression,” but Malpass was less concerned with the terminology.
“We can start calling it depression,” he said. And he added: “Our focus is on how we can help countries to be resilient.”
– More transparency of debt –
Malpass said he was “frustrated” by slow progress among private creditors in providing debt suspension terms for poor countries.
While the Institute of International Finance (IIF), the global financial industry association, has set a framework for waiving debt service payments, as of mid-July, member banks had not received any requests.
Having a clear view of the size of each country’s debt and the guarantees involved is also key to helping debtor countries, Malpass said.
China is a major creditor in many of these countries, and the government has been “participating in the transparency process,” but said more needs to be done to understand the terms of loans in nations like Angola, where there are levies on production. of oil.
So far, governments of advanced economies have been “generous” in their support of developing nations, even as they undertake large spending programs in their own countries, Malpass said.
“But the biggest problem is that their economies are weak,” Malpass said of the rich nations.
“The most important thing advanced economies do for developing countries is supply markets … start growing and start reopening markets,” he added.
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