Soon, more countries will face serious debt problems and likely defaults if prompt action is not taken, World Bank President David Malpass said on Tuesday, calling for debt restructuring and a focus on inequality and investment in the “post-economy.” -COVID “.
Why it’s important: Malpass is the latest to issue a stern warning about the state of the world economy and calls on creditors, such as China and the Paris Club’s rich nations group, to share the burden.
Where is it: Malpass, a former Treasury Department official for President Reagan and a Bear Sterns economist who was appointed by President Trump, called the current debt levels of many countries “unsustainable” and said a growing number are currently in ” red alert “for defaults.
- “Given the sharp decline in short- and long-term interest rates, we need to find ways to adjust the debt burden process so that the debt burden on people in the poorest countries can be drastically reduced.”
What we are hearing: In addition to the risk of rising debt defaults and rising poverty in developing economies, the World Bank’s goal of increasing median incomes in countries “is not meeting the current environment.” , said Malpass.
- This is “partly because the stimulus mechanisms that are in place are working to concentrate wealth rather than add wealth from the bottom up,” Malpass told Axios during a question and answer session with reporters.
- “One thing I think is important is that we recognize that creative destruction is important, that is, small businesses fail because of the severity of the recession. But even more important is the creation of new small businesses, innovation.”
It continued: “And so that would mean that countries allow this process to happen and not just work through their large structures to give funding to large companies.”
A deeper level: “The risk is that it may take years for people at the bottom of the income scale to see a sustained improvement in their circumstances.”