File photo: CGTN
World Bank Group President David Malpass on Saturday urged the Group of 20 (G20) countries to extend the time frame of the Debt Service Suspension Initiative through the end of 2021, calling it one of the key factors in strengthening global recovery.
"I urge you to extend the time frame of the Debt Service Suspension Initiative (DSSI) through end 2021 and commit to give the initiative as broad a scope as possible," Malpass made the remarks at the virtual G20 Finance Ministers and Central Bank Governors Meeting, according to a statement.
"We've made a great deal of progress with DSSI in a short period of time, but more needs to be done," said the World Bank chief.
Malpass said that the pandemic has triggered the "deepest global recession in decades," and what may turn out to be "one of the most unequal" in terms of impact.
"For the poorest countries, poverty is rising rapidly, median incomes are falling, and growth is deeply negative," he said. "Debt burdens -- already unsustainable for many countries -- are rising to crisis levels."
Even with these immediate steps -- a longer suspension of debt payments, a DSSI scope that includes more debt and more official bilateral creditors, participation by commercial creditors and the World Bank's large positive net flows -- many of the poorest countries won't be able to make the resulting debt burdens sustainable in the medium term, Malpass noted.
"The economic repercussions from the pandemic are expected to inflict lasting scars on growth through lower investment, erosion of human capital, and the retreat from global trade and supply linkages," he warned.
The World Bank president urged the G20 to "open the door to consultations" about the debt overhang itself and effective ways to reduce the net present value of both official bilateral and commercial debt for the poorest countries.
He noted that the debt resolution process should be improved.
"Looking longer term, creditors' rights frequently take precedence over the people in the debtor countries, adding to the difficulty of debt resolutions," he said. "The international community needs to recognize this imbalance if we are going to achieve effective debt resolutions or adjust the process in a way that encourages good outcomes."
Malpass also highlighted the importance of debt transparency, noting that creditors need to fully assess the debt sustainability of their potential borrowers, citizens need to be able to evaluate their leaders for the debt they take on, and borrowers need to design strategies based on a clear understanding of their debt.