The debt burden in low-income countries rose to a record $ 860 billion in 2020, prompting World Bank President David Malpass on Monday to call for a “comprehensive plan” to address the problem.
Efforts to combat COVID-19 exacerbated already rising debt levels and debt relief will be necessary, Malpass said.
“Sustainable debt levels are vital for economic recovery and poverty reduction,” he noted.
The situation is urgent as the Debt Service Suspension Initiative (DSSI), launched by the Group of 20 industrialized (G20) at the beginning of last year and which allows countries to defer debt payments while facing to the pandemic, it expires at the end of the year.
“We need a comprehensive plan for the debt problem, including debt reduction, faster restructuring and greater transparency,” Malpass said.
World Bank data released Monday showed that the deterioration in debt indicators was widespread, affecting countries in all regions, in all low- and middle-income countries.
“Many developing countries started 2020 in a vulnerable position, with public external debt already at high levels,” the report said, and then governments provided unprecedented resources to try to contain the virus and the economic consequences.
The World Bank and the International Monetary Fund (IMF) have also increased support, especially to the most vulnerable countries.
In 2020, net flows from multilateral creditors to low- and middle-income countries rose to $ 117 billion, “the highest level in a decade,” according to the report.
“The risk now is that too many countries will emerge from the COVID-19 crisis with a large debt overhang that could take years to manage,” Malpass said in the report.