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Debt cancellation needed to help poorest countries — World Bank President

TO avert a possible Covid-19 pandemic-driven debt crisis in some nations especially the poorest countries, World Bank president, David Malpass, has thrown his weight behind cancellation of debts for the poorest countries.

Speaking yesterday, Sunday, in an interview with Handelsblatt Business Daily, Malpass said it is evident that some countries are unable to repay the debt they have taken on.

“We must therefore also reduce the debt level. This can be called debt relief or cancellation, It is important that the amount of debt is reduced by restructuring.” Malpass said.

The World Bank president, who spoke about similar steps in previous financial crises such as in Latin America and HIPCC initiative for highly indebted countries in the 1990s, said investors must be ready to grant some form of relief that could also include debt cancellation as the Debt Service Suspension Initiative (DSSI) will help free resources for developing countries to respond to the challenges posed by the coronavirus pandemic.

Last month, some rich countries supported an extension of the G20’s Debt Service Suspension Initiative (DSSI), approved in April, to help developing nations survive the coronavirus pandemic.

The initiative has seen 43 of potential 73 eligible countries defer $5 billion in official sector debt payments.

Renewing his call for private banks and investment funds to also get involved amid warnings that the pandemic could push 100 million people into extreme poverty, he warned that the pandemic could trigger another debt crisis as some developing countries had already entered a downward spiral of weaker growth and financial trouble.

The World Bank boss added that enormous budget deficits and debt payments are overwhelming these economies and the banks there are getting into difficulties due to bad loans.

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