Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

World Bank walking tightrope as it mulls increased lending to poorest

World Bank walking tightrope as it mulls increased lending to poorest

Campaigners say bank should rush to rescue countries facing recession – but can it do so without resulting in mass debt write-offs?
Not since the early 1990s has the world faced such a period of low growth.

Discounting the havoc caused by the financial crash of 2008 and the initial impact of the Covid-19 pandemic, the World Bank says that by the end of 2024 it will have been 30 years since the global economy grew at an average of less than 2% a year.

Worse, the world stands on a “razor’s edge” and risks falling into a recession this year if the situation in Ukraine deteriorates any further or another global crisis emerges.

The poorest will suffer the most. And for that reason the Washington-based development funder is hoping to persuade major donors, and especially the EU, US and China, to widen its lending capacity.

Ahead of its annual meeting in April, which is held in the US capital with its sister organisation, the International Monetary Fund, the World Bank is seeking support for proposals that include a deeper pool of capital to draw on and new lending tools.

This “evolution roadmap” is designed to give the bank more flexibility to meet a series of overlapping crises that the New York university economist Nouriel Roubini, among others, has argued is the new normal.

Wars, famines and the climate emergency will continue to trigger food shortages and energy price spikes that fuel inflation. Interest rates, for so long at near zero, will remain above long-term trends, they say.

The Bank president, David Malpass, hopes to prevent countries that have made huge strides in the last 30 years towards food security and stable public debts from going backwards.

One of the biggest headwinds faced by developing world governments is the increase in debt costs. When most debts are denominated in dollars or euros, the aggressive rate rises by the US Federal Reserve and the European Central Bank matter.

Kenya might be one of the more durable, financially solvent nations in sub-Saharan Africa, but its debt payments are expected to average more than 30% of government revenues this year.

And after two decades of being encouraged to seek loans from international banks – and when that proved expensive, Chinese development banks – the country’s president, William Ruto, who has only been in place since last September, is keen to switch back to borrowing from the World Bank.

Ruto is unlikely to be alone. More than £63bn was spent last year by the 75 countries, many of them in sub-Saharan Africa, that make up the poorest nations, to cover loans taken out mostly over the previous decade.

Malpass wants to increase lending, but without sacrificing the institution’s AAA credit rating. It will be a difficult tightrope to walk.

Private lenders have reduced the pool of developing countries they are prepared to consider for loans. Before the pandemic, one in five countries could borrow privately. Now it is just one in 15.

Malpass would struggle to meet the demand from countries shut out by private lenders without accepting the risk that many governments might default. Debt write-offs would force credit agencies to say the new policy warrants a downgrade.

Anti-poverty campaigners say the World Bank should shrug off the threats of credit agencies and rush to rescue countries that are cutting education and health budgets to meet debt costs, if, like Zambia and Sri Lanka, they are not bust already.

While slow global growth and war in Europe are not going to help the situation, campaigners say escalating debt payments, enriching western banks, are the more immediate problem, and one that Malpass could actually help to solve.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Massive Anti-Government Protests Erupt in Belgrade
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Hungary's Prime Minister Criticizes NATO's Role in Ukraine
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Hungarian Scientist to Conduct 30 Research Experiments on the International Space Station
NATO Members Agree to 5% Defense Spending Target by 2035
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
International Astronaut Team Launched to Space Station
Macron and Merz: Europe must arm itself in an unstable world
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Iran Intensifies Crackdown on Alleged Mossad Operatives After Sabotage Claims
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
Oil Prices Set to Surge After US Strikes Iran
BA and Singapore Airlines Cancel Dubai Flights Amid Middle East Tensions
Trump Faces Backlash from MAGA Base Over Iran Strikes
Meta Bets $14 B on Alexandr Wang to Drive AI Ambitions
FedEx Founder Fred Smith, ‘Heart and Soul’ of the Company, Dies at 80
Chinese Factories Shift Away from U.S. Amid Trump‑Era Tariffs
Pimco Seizes Opportunity in Japan’s Dislocated Bond Market
Labubu Doll Drives Pop Mart to Status as China’s Most Valuable Toy Maker
Global Coal Demand Defies Paris Accord Goals
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
Telegram Founder: I Will Leave My Fortune to Over 100 of My Children
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
×