KHARTOUM, Sudan
The World Bank has urged low- and middle-income countries to consider restructuring their debts when the Debt Service Suspension Initiative (DSSI) expires in the next three months so that they can sustain economic recovery amid the pandemic.
According to the bank over half of the
world’s poorest countries are now in external debt distress and the situation
could worsen if commodity prices are volatile, interest rates increase or
investors lose confidence in emerging markets.
The bank’s president, David Malpass, said
when the DSSI expires at the end of this year low-income countries will resume
debt service payments which would reduce their fiscal space and limit their
ability to purchase vaccines and to finance other priority expenditures.
“It is time to pursue a gradual and
people oriented fiscal consolidation and to restructure unsustainable debts,”
Malpass said in the Sudanese capital Khartoum on Thursday ahead of the 2021
Annual International Monetary Fund-World Bank meetings to be held from October
11 to 17.
He said global co-operation including
with the private sector is required to provide debt relief to the poorest
countries and fund growth enhancing investments.
The Bretton Woods institutions urged G20
countries to establish the DSSI to help countries concentrate their resources
on fighting the Covid-19 pandemic and safeguard the lives and livelihoods of
millions of the most vulnerable people.
Since it took effect on May 1, 2020, the
initiative has delivered more than $5 billion in relief to more than 40
eligible countries
A total of 73 countries are eligible for
a temporary suspension of debt-service payments owed to their official
bilateral creditors.
World Bank lauded Sudan’s process in
macroeconomic stabilisation two years after the transitional government
inherited a deeply damaged economy and society that suffered decades of
conflict and isolation.
“As people of Sudan resolved to break
with the past, Sudan faced extraordinary headwinds from the Covid-19, from the
locust plague, from unprecedented floods and from the inflow of refugees
escaping conflicts from across the border.
‘‘Yet the country pressed forward with
good reforms, re-engaging with the international community.
“It is great pleasure for me to be
speaking today from Africa in this challenging time for the continent and for
the world. These are extraordinary difficult times for Sudan and for Africa and
millions of people around the World,” said Malpass.
Sudan has taken difficult steps to put
its people on the path to long term prosperity after decades of international
isolation.
This is a very high-level visit by a World
Bank official since the country reached the Heavily Indebted Poor Countries
(HIPC)decision point in June this year — an important milestone that will
enable the country to clear nearly all of its estimated $50 billion in external
debt.
Sudan is supported by the International
Development Association (IDA), the World Bank’s fund for the poorest countries.
“In these troubling times of upheaval,
the challenge for the people and for the development community is to shoulder
the crisis, resume development and lay a strong foundation for the future,”
said Malpass.
“In many places around the world poverty
is rising, living standards and literacy rates are falling while nutrition and
healthcare are sliding backwards
According to the bank, low-income
countries are facing high inflation, too few jobs, scarcity of vaccine and food
and high cost of adapting to climate challenge they did not create.
“To combat reversals in development we
will need strong new approaches suited for these very challenging times.
‘‘We need to focus our efforts more to
set clear priorities by measuring what works and what doesn’t and to rapidly
scale up successes.
“The Covid-19 crisis has resulted in
increased poverty rates and pushed 100 million people into extreme poverty with
several hundred million more becoming poor of which many of them are in middle
income countries.”
According to the bank, human capital
accumulation has stalled with most schools closing for months.
The global pandemic also imposed a heavy
toll on firms and governments, with business closures skyrocketing while those
firms and that remained active are heavily indebted or arrears.
“Governments have large fiscal deficits
often pushing public debt to dangerous high levels that require especially
careful investment decisions by both the public and private sectors,” he said.
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