World Bank chief: Poor nations need debt reduction to fight pandemic

World Bank chief: Poor nations need debt reduction to fight pandemic

Malpass says it will take years for global economy to recover

WASHINGTON — In an exclusive interview with Nikkei, World Bank President David Malpass predicted that it would take several years for the global economy to recover to pre-crisis levels. 

Edited excerpts of the interview follow.

Q: At this year’s Group of 20 summit there was a new agreement on restructuring government debt for low-income countries. Is this debt potentially a huge risk for the world economy and the financial market?

A: It’s a huge risk. Even before the pandemic, many of the poorest countries had taken on so much debt that it was undercutting, it was impeding, their ability to attract new investment.

As the pandemic struck, all of these burdens got heavier on the people of the country. The challenge is to provide some lasting debt relief, and that means a reduction in the net present value of the debt itself, and also to get all of the creditors to participate. That means the private-sector creditors who, by and large, have simply continued to take payments.  

And the public creditors need to participate more fully. One of the largest public creditors is China, and I’ve been pleased to see that it’s been broadly in participation.