The world's poorest countries now owe $62 billion in annual debt service to official bilateral creditors, an increase of 35 per cent over the past year, World Bank president David Malpass said, warning that the increased burden is increasing the risk of default.
Two thirds of this debt burden is now owed to China, Mr Malpass on Thursday told the Reuters Next conference in New York, providing some details of the development lender's annual debt statistics report due next week.
"I'm worried about a disorderly default process where there's not a system to really address" debts for poorer countries, Mr Malpass said.
He voiced his concerns about a build-up of debt in advanced economies such as the US, which he said was drawing more capital away from developing countries.
"And so as the interest rates go up, the debt service goes up for the advanced economies, and that requires a big amount of capital from the world," he said.
Mr Malpass said he would join a meeting in China next week with heads of various international institutions and Chinese authorities to discuss the country's approach to debt relief for poorer countries, Covid-19 policies, property sector turmoil and other economic issues.
"China's one of the big creditors, so ... it's very important that China engage on this issue and think about where it sees the world going and be responsive to work with what needs to be done to achieve sustainability for the countries," he said.
International Monetary Fund chief Kristalina Georgieva will also participate in the meeting, which will focus heavily on debt treatment. Among others attending will be officials from China Development Bank and the Export-Import Bank of China, two of the country's major bilateral lenders.
Ms Georgieva separately told Reuters Next that changes to the G20 Common Framework on debt restructuring were needed to speed up debt treatment, freeze debt service payments once a country requested help and open the process to middle-income countries like Sri Lanka.
"We are concerned that there is a risk for confidence in debt resolution to be eroded at a time when the level of debt is very high," she said.
"We don't see at this point ... a risk of a systemic debt crisis," she said, adding that countries in debt distress were not large enough to trigger a crisis that would threaten financial stability.
Source: The National
Image: VON
