World Bank chief economist Indermit Gill is calling for new approaches to address the mounting debt crisis facing many countries, including steps to factor domestic borrowing into assessment of a country’s debt sustainability. | Reuters
Only four countries – Zambia, Chad, Ethiopia and Ghana – have applied for relief under the G20 mechanism set up in late 2020 at the height of the COVID-19 pandemic, although the International Monetary Fund estimates that many more – 60 percent of low-income countries – are in or at high risk of debt distress.
“Debt levels are already starting to hurt prospects, getting them into the wrong kind of spiral,” he said ahead of a World Bank seminar on debt on Wednesday. “Many of these countries are in debt crisis already. A country like Egypt is under water.” IMF officials said China and other participants reached a common understanding that multilateral development banks could provide positive net flows of loans and grants to countries in need, instead of accepting “haircuts.”
One key issue remained how the IMF and the World Bank assessed the debt sustainability of countries while excluding domestic borrowing, which masked too-high levels of borrowing.
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