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Called advanced economies to restructure financial obligations of debt-ridden developing nations
The World Bank is lowering its 2022 global economic growth forecast to 3.2% from 4.1%, nearly a percentage point, due to the impacts of Russia’s invasion of Ukraine, World Bank President David Malpass said on Monday.
The decline was stimulated by a cut in Europe and central Asia’s outlook, including Russia and Ukraine, Malpass told reporters on a conference call.
Although the Washington-based institution predicted global economic growth of 4.1% in January, the Russia-Ukraine crisis since February 24 turned the financial situation of the world, which was recovering from COVID-19, upside down.
Forecasts are also being reduced for advanced and many developing economies due to spikes in food and energy prices caused by war-related supply disruptions.
Relief package to combat Russia-Ukraine crisis
World Bank President told reporters that he is expecting to discuss about a new 15-month crisis response package of about $170 billion with the financial institution’s board in the coming weeks.
The package will cover from April 2022 to June 2023, with about $50 billion to be committed over the next three months to soften the economic impact of the Russia-Ukraine crisis.
“This is a continued, massive crisis response given the continuation of the crisis,” Malpass said, adding that the new initiative will exceed the $157 billion deployed for the initial phase of the COVID-19 pandemic.
The financing will partly support nations that have taken in refugees from Ukraine and are helping other countries that are affected by food shortages.
Calling for restructuring of debt
Malpass expects the debt crisis for low- and middle-income nations to worsen this year.
“Countries are under severe financial stress — 60% of low-income countries are already in debt distress or at high risk of it,” Malpass said, calling the G20 nations’ Common Framework to reorganize the debt of low-income nations in danger of default.
There has been slow progress on a plan to help restructure the financial obligations of the debt-ridden developing nations by the advanced economies as a $35 billion bill is coming due this year.
Picture Credit: FT
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