World Bank President calls China to cancel debt to coronavirus-hit poor countries

World Bank President David Malpass has called wealthy nations, including China, to cancel debts to poor countries to help them withstand the impact of coronavirus, saying efforts so far were important but inadequate.

Addressing an online event hosted by the Frankfurt School of Finance and Management on Monday, World Bank president David Malpass blamed China for worsening debt situation in some poor countries and accused it of not taking part fully in the Group of 20 Debt Service Suspension Initiative (DSSI).

Malpass said that, an added factor in current wave of debt troubles in world’s poorest countries was “the rapid growth of new official lenders, especially several of China’s well-capitalised creditors”. He added, they have expanded their portfolios dramatically and are not fully participating in the debt rescheduling processes that were developed to soften previous waves of debt.

Japan, few days ago, urged Group of Seven (G7) advanced economies to put more pressure on Beijing to abide by G-20 led DSSI, saying that China’s participation in the debt relief initiative was insufficient.

Malpass said, the World Bank and the IMF have called on the G20 to extend the DSSI’s relief through the end of 2021. Highlighting the issues in the debt relief, he said, Debt payments are simply being deferred, not reduced. It doesn’t produce light at the end of the debt tunnel, he lamented. Given the depth of the pandemic, a meaningful reduction in the stock of debt is required for countries in debt distress, he said. He pointed at the creditors in wealthy countries saying that they are usually better financed with the highest paid lawyers representing them, often in U.S. and UK courts that make debt restructurings difficult.