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WASHINGTON DC: The world’s two dominant emergency lenders opened their annual meetings on Wednesday (Thursday in Manila) with a renewed call for the rich to help the poorest cope with the ravages of the coronavirus pandemic, within national borders and at the level. world.
IMF and World Bank leaders have been beating the drum on the need for governments to keep spending amid the crisis to help support unemployed workers and businesses, to prevent the emergency from worsening.
But with national and corporate debt levels soaring amid historically low interest rates, the crisis presents a puzzle for Washington-based institutions that have always called for caution in spending.
Calls to spend have so far been heeded, but IMF Director Kristalina Georgieva and World Bank President David Malpass are sounding the alarm so they don’t get too complacent with initial success and urging creditors. China and private lenders in particular, to do more to alleviate debt. burden on the most vulnerable countries.
“Nine months after the pandemic, we are still grappling with the darkness of a crisis that has claimed over a million lives and caused the economy to reverse, leading to much higher unemployment, increased poverty and risk of ‘a lost generation’ in low-income countries, “Georgieva told reporters.
“What worries me most is withdrawing support for workers and companies prematurely, because it could cause a wave of bankruptcies and a massive increase in unemployment,” he warned.
The fund projects a 4.4 percent drop in global GDP this year, a smaller decline than was forecast in June due to the staggering $ 12 trillion in resources that governments injected into their economies around the world.
But despite a 5.2 percent recovery forecast for 2021, the world economy is expected to lose $ 28 trillion in output over the next five years.
And with signs that the virus is re-emerging in many countries and there is still no vaccine available despite the global push, Georgieva warns that “all countries now face a ‘Long Ascent’” to emerge from the crisis, “a journey that it will be difficult, uneven and uncertain and prone to setbacks.
In keeping with its tongue-in-cheek moniker “It’s Mostly Tax,” the fund is again recommending that lawmakers consider raising taxes, but now said those increases should focus on wealthy individuals and businesses, especially those that may have benefited during the pandemic.
That revenue could then be used to provide healthcare, job training and other support to citizens in need, the fund said. Meanwhile, Malpass has been particularly strident in his calls for governments and corporations to provide more debt relief to poor nations.
The Group of 20 major economies earlier this year agreed to a suspension of debt service for the 43 poorest countries, releasing up to $ 5 billion through the end of the year, less than the expected $ 8-11 billion.
The G20 on Wednesday approved a six-month extension of the Debt Service Suspension Initiative (DSSI), but Malpass has continued to raise concerns about a lack of transparency in lending, especially, but not only, from China.
China is the largest of the creditors, as its share of debt owed to all G20 countries rose to 63 percent at the end of last year from 45 percent in 2013, often through massive infrastructure projects in developing countries.
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