By Emma Ujah, Abuja Bureau Chief
Three months to the expiration of the Debt Service Suspension initiative, DSSI, by the G20 member countries, the World Bank has called for general debt restructuring for poor nations.
DSSI was an initiative through which the bank and the International Monetary Fund, IMF, persuaded the creditor-nations to suspend debt service by debtor nations to enable them tackle the COVID-19 pandemic in 2020.
It helped debtor countries to concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people.
DSSI took effect on May 1, 2020, with an initial expiration on December 31, 2020, but was extended to December 2021.
In his opening address, leading to the Annual Meetings of the bank and the IMF in Khartoum, Sudan, yesterday, the President of World Bank Group, Mr. David Malpass, said unless a fresh debt restructuring was agreed, economies of poor debtor-countries would sink further as, according to him, most of them are already in debt distress or at its risk since June, this year.
He said: “Many developing countries have made extraordinary efforts to support their people and keep economic activity going during the pandemic.
“Many have gone beyond what they could afford, especially as debt in developing economies was at record highs when the pandemic hit. As of mid-2021, over half of IDA countries – the world’ poorest countries – are in external debt distress or at high risk of it.
“This situation could worsen if commodity prices are volatile, interest rates increase, or investors lose confidence in emerging markets.
“When the debt service suspension initiative – or DSSI – expires at the end of this year, low-income countries that resume debt service payments will see their fiscal space shrink, limiting their ability to purchase vaccines and finance other priority expenditures.
“It’s time to pursue a gradual and people-oriented fiscal consolidation, and restructure unsustainable debt. Enhanced and accelerated implementation of the Common Framework will be critical on this front. We need global cooperation, including private sector participation, to provide debt relief to the world’s poorest countries and fund growth-enhancing investments.
“In Sudan, for example, global cooperation that included the U.S., France and the UK helped the country clear its arrears with the World Bank, IMF and other IFIs, making possible more than $50 billion in debt relief in what will be the largest HIPC initiative ever.”
Malpass noted that they were already being left behind and that the developed world must take deliberate steps to assist the poor, through inclusive policy measures.
“Rather than gaining ground, the poor are being left behind in a global tragedy of inequality. This drastic narrowing of economic and social progress is creating a time of upheaval in economics, politics, and geopolitical relationships.
“While some advanced economies are providing trillions of dollars in spending programs and central bank asset purchases, low-income countries are facing high inflation, too few jobs, a shortage of vaccines and food, and the high cost of adapting to climate challenges that they did not create,.” he said.
The president added that in this troubling time of upheaval, “the challenge for people – and for the development community – is to shorten the crisis, resume development, and lay a strong foundation for a future that is more prosperous and better prepared for disasters like COVID-19.
“To combat the reversals in development, we will need strong new approaches suited for these very challenging times. We need to focus our efforts more, set clear priorities by measuring what works and what doesn’t, and rapidly scale up successes.|”
The World Bank boss said the world was in need of need education, nutrition and vaccination programs that could reach hundreds of millions of children.
He added: “We need digital cash transfer programs that can provide necessary resources to billions of people in the next crisis.
“In response to climate change, we need thousands of large public-private projects that combine the world’s resources – from governments, MDBs, foundations, private investors, and the buyers of carbon credits – in order to reduce carbon emissions and increase electricity access.
“We need thousands more projects that help people adapt to climate change in ways that will save lives.
“The World Bank Group remains committed to alleviating poverty and boosting shared prosperity in our client countries – from people in the poorest countries to those in middle-income countries who are being left behind.
“This involves creating chances for everyone to benefit from the digital revolution and requires empowering women and protecting girls to offset deeply rooted sources of disadvantage.”