Debt in advanced economies faces global challenges, says World Bank president


World Bank Group President David Malpass on April 13, 2023 in Washington, DC

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Developed economies around the world are facing a debt problem, according to World Bank President David Malpass, and this is piling up on other headaches in the global economy as central banks battle persistent inflation.

Speaking to CNBC’s Martin Soong at a meeting of G-7 finance ministers and central bank governors in Japan, Malpass emphasized that stability needed to address record-high global debt levels.

“The debt-to-GDP ratio for advanced economies is higher than ever,” he said, adding that developing countries are also facing a similar issue. “This means the economy will have to work much harder to pay back the money it has already borrowed.”

The World Bank has stressed the need for transparency in addressing rising debt in the face of a number of global economic issues including stress in the banking sector and stagnant inflation.

The organization presided last month Global Sovereign Debt Roundtable Highlighted his call for information sharing to speed up the debt restructuring process in Washington DC and around the world.

In its year-end report released in December, the World Bank said that the total external debt of low- and middle-income countries increased marginally by 5.6%. $9 trillion,

for all countries, international finance institute It was estimated earlier this year that global debt has shrunk to less than its nominal value. 2020 levelstands below $300 trillion in 2022.

“One of the things for advanced economies is to try to find an environment as stable as possible to get growth back which is really important for the world,” Malpass told CNBC.

“The risk-free rate has increased from advanced economies, but credit spreads have widened for developing countries as well,” he said.

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The risk-free rate of return indicates the interest rate an investor can expect to earn on an investment with zero risk.

“They[investors] There’s always going to be the safest advanced economies to choose from first, so what’s left can flow to developing countries, and that’s not enough,” Malpass said, giving less developed economies a “double whammy of increased debt burden costs.” has to be faced and no opportunity to roll it down.”

Asked about his plans after leaving office in June – before his term expires in April 2024 – he said he was “exploring options.”

“We’re very busy in the bank doing things that are really important — this loan, growth initiatives, we’re in the last quarter of our fiscal year,” he said.

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