China needs to provide more clarity to the global industry about its lending to poor countries, said the new head of the World Bank while also warning that once again there has been an increase in debt problems are once again on the increase.
High risk of debt distress is already being faced by 17 countries in Africa, said the World Bank president, David Malpass, in his first public appearance .
“That number is growing as new contracts come in and are not transparent,” he added.
While countries would be able to enhance their economic performance, it would also exert a negative impact on growth, Malpass said.
Beijing has been providing huge loans to various governments in Africa for infrastructure projects on a no-political strings basis thereby increasing its influence in the region. But concerns about the risks of corruption and over-indebtedness were expressed by both World Bank and its sister organisation, the International Monetary Fund.
The process of transforming debts to enable borrowing to have a positive impact on poor countries was to “have transparent disclosure as it is being created and to have quality projects. Bilateral donors can do better,” Malpass said.
The emergence of new lenders during the past decade would complicate the attempts to resolve a new debt crisis, said Christine Lagarde, the managing director of the IMF. In recent years, debt has increased for both Chinese and private lending.
There is high risk of debt distress among at least 40 per cent of poorer countries, estimated the IMF, because these countries had made huge borrowings when the global rates of interest were low while commodity prices were high.
“The Bank and the IMF are working together in order to bring about more transparency and be better able to identify debt out there,” Lagarde said. The terms and conditions related to a borrowing, the amount of the loan and the repayment period of a debt has to be considered while taking a debt, she added.
Since 2010 the world’s poorest countries are paying double the debts according to the calculations of the Jubilee Debt Campaign and currently they are at their highest level since just before the write-down agreed by the G8 at the Gleneagles summit in 2005.
People in the poorer countries were being hit the hardest because of the current phase of global slowdown seen throughout 2018, Malpass said, and warned that efforts of eradicating extreme poverty would be hindered by the failure to enhance living standards of such people.
“On current trends, per capita income growth in sub-Saharan Africa, as a whole, is now projected to stay below 1% until at least 2021, which elevates the risk of a further concentration of extreme poverty on the continent.
“This fact is extremely troubling, because it jeopardises the World Bank’s primary goal of ending extreme poverty by 2030.”
“By 2030, nearly nine in 10 extremely poor people will be Africans, and half of the world’s poor will be living in fragile and conflict-affected settings”, he said.
(Adapted from TheGuardian.com)