World Bank President says debt in advanced economies piles on global challenges

David Malpass, World Bank Group president in Washington, DC, on April 13, 2023

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According to World Bank President David Malpass, developed economies around the world are facing a debt problem and that piles up on other headaches in the global economy as banks Central banks continue to grapple with persistent inflation.

Speaking to CNBC’s Martin Soong at a meeting of G-7 finance ministers and central bank governors in Japan, Malpass emphasized that record-high global debt levels need to be addressed to stabilize.

“The debt-to-GDP ratio of advanced economies is higher than ever,” he said, adding that developing countries are also facing the same problem. “That means the economy has to work much harder just to pay back the money that was borrowed.”

The World Bank has emphasized the need for transparency in dealing with rising debt in the face of a number of global economic problems, including strains in the banking sector and persistent inflation.

Organized last month Roundtable on global national debt in Washington DC and highlighted a call to share information to accelerate the restructuring of the world’s debt.

World Bank says credit gap for developing countries has widened

In its year-end report released in December, the World Bank said the total external debt of low- and middle-income countries increased by 5.6 percent in nominal terms to 9 trillion dollars.

For all countries, the International Finance Academy estimated earlier this year that the nominal value of global debt fell from level 2020stand below $300 trillion by 2022.

“One of the things for advanced economies is to try to find a stable environment in which growth can return, which is really important to the world at this point,” Malpass said. CNBC.

“The risk-free rate has increased in advanced economies, but credit spreads have also widened for developing countries,” he said.

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The risk-free rate of return indicates the rate of return an investor can expect to earn on a risk-free investment.

“Surname[investors] always pick the safest advanced economies first, so what’s left is what can flow into the developing world, and that’s simply not enough,” Malpass said, adding added that less developed economies face “a double burden of rising debt burden costs and not an opportunity to roll it over.”

When asked about his plans after he steps down in June – sooner than April 2024 when his term expires – he said he is “exploring options”.

“At the bank, we’re too busy with the things that really matter — this debt, the growth initiative, we’re in the last quarter of the fiscal year,” he said.


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