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Thursday, January 21, 2021

World Bank Warns of Post Pandemic Debt Crisis

World Bank president David Malpass warned of a new global debt crisis after the COVID-19 pandemic if no actions were taken to mitigate it.

World Bank president David Malpass warned of a new global debt crisis after the COVID-19 pandemic if no actions were taken to mitigate it.

The World Bank explained that global debt levels surged to 99% of projected GDP last year due to government spending on relief such as direct payments to individuals, unemployment insurance, and welfare.

“Given the sharp decline in short-term and long-term interest rates, we need to find ways to adjust the debt burden process so that the burden of debt on people in poorer countries can be reduced dramatically,” said Malpass.

According to the World Bank’s Global Economic Prospects (GEP) report, the pandemic contributed to the sharpest annual increase in government debt in more than three decades and had exposed vulnerabilities in the emerging market and developing countries.

 The World Bank added that emerging economies are in need of help and are almost defaulting on their debt. 

The GEP said there would be only a subdued recovery in 2021, with projected growth of 4% which is still below the pre-pandemic levels.

The World Bank expects growth to slow down by 3.8% in 2022 which could worsen if countries don’t reinvest assets to become less dependent on debt. 

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