Malpass says debt relief critical for poor countries

World Bank president David Malpass warned the current global economic climate could lead to widespread defaults in the developing world. Speaking on December 1, he said he was “worried about a disorderly default process”.

Malpass said the 74 low-income countries that participate in the World Bank’s International Development Association (IDA) owe 35% more this year than in 2021. This comes to $62 billion.

He said creditors were too slow to offer these countries debt restructuring. He singled out China, which held nearly two-thirds of these countries’ bilateral debt, saying there is “a responsibility on China to engage with the process”.

Malpass and International Monetary Fund head Kristalina Georgieva will hold talks in Beijing with the Chinese government on debt relief and other subjects this week.

The World Bank president also said advanced economies could face debt problems, as interest rates climb to meet inflationary challenges.

A few developing countries have defaulted in recent years. Lebanon and Zambia defaulted in 2020. Sri Lanka officially defaulted in May 2022.

The IMF provided more than $900 million in debt relief through its Catastrophe Containment and Relief Trust between 2020 and 2022. The IDA finalised a new $93 billion funding package at the end of 2021.