The crisis linked to the Covid-19 epidemic could push an additional 100 million people into extreme poverty around the world. This is even more than previously estimated, warned World Bank President David Malpass on Thursday in an interview with AFP.
The institution estimates that 70 to 100 million people could fall into extreme poverty, and "that number could increase" if the pandemic worsens or lasts, he said. A previous estimate was 60 million people.
Poorest countries' debt repayments suspended until the end of 2020
This makes it "imperative" for creditors to reduce the debt of poor countries, said David Malpass, going beyond calls to extend the moratorium on the debt of the poorest countries.
However, more countries will have to restructure their debt. "Debt vulnerabilities are high, and it is imperative (for indebted countries) to see the light at the end of the tunnel in order to attract new investors," added the President of the World Bank, in office since 2019.
The G20 countries decided in April to suspend the debt repayments of the poorest countries until the end of 2020. NGOs, but also the World Bank, are calling for this moratorium, which concerns 76 countries, to be extended until 2021. The G20 countries will vote by October, the date of their next meeting.
Countries that will struggle to honor refunds
But that will not be enough, says David Malpass, because the economic downturn means that these countries, which already struggle to provide a social safety net to their citizens, will find it difficult to honor these payments.
The amount of debt reduction should depend on the situation in each country, he said. The institution has deployed $ 160 billion in emergency aid to around 100 states, of which about $ 21 billion had been released at the end of June.
"Pandemic depression"
In 2015, the most recent estimate given on the World Bank website, some 734 million people were already living in extreme poverty, or about 10% of the world's population. But extreme poverty, living on less than $ 1.90 a day, has continued to increase since the start of the pandemic.
This deterioration is due to job losses during the pandemic linked to supply difficulties, which complicate access to food. World Bank chief economist Carmen Reinhart, who recently took office, called the economic crisis a "pandemic depression". “You can start to call it depression. We are now focusing on how to help countries bounce back, ”commented the president of the institution.
A framework for organizing the suspension of the debt
David Malpass said he was "frustrated" by the slow progress, on the private creditors side, for the suspension of the debt of poor countries.
A framework to organize the suspension of this debt has been developed by the Institute for International Finance - international association of financial actors (banks, private funds, insurers, central banks, sovereign funds). But in mid-July, the member banks of this organization had not yet received any requests.
China is one of the biggest creditors of poor countries
To help countries that need it, it is also important to have a clear vision of the size of the debt of each and the countries involved, underlined David Malpass.
China is one of the largest creditors of many of these countries, and the government is "participating in the process" to make the structure of their debts more transparent, he said, however, believing that it must be done. more to understand the terms of loans to certain countries.
"Reopen the markets"
As for the governments of advanced economies, they have so far been "generous" in their support to developing countries, but "the main problem is that their economies are weak", further explained the president of the institution. Bretton Woods.
“The most important thing that advanced economies can do for developed countries” is, according to David Malpass, “to provide customers, (…) start to grow and start to reopen markets”.
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