Up to 60m people will be pushed into extreme poverty by the economic consequences of the coronavirus crisis, and current recovery efforts are not enough, David Malpass, president of the World Bank, has warned.
The Bank expects world economic output to contract by as much as 5 per cent in 2020, erasing efforts over the past three years to alleviate poverty in the world’s poorest countries, Mr Malpass said on Tuesday.
“Millions of livelihoods have been destroyed and healthcare systems are under strain worldwide,” he said.
The World Bank defines “extreme poverty” as living on less than $1.90 per person per day.
The World Bank Group is offering $160bn in grants and low interest loans to help poor countries tackle the crisis over a 15-month period. Mr Malpass said that 100 countries, home to 70 per cent of the world’s population, had already been granted emergency finance.
However, he said: “While the World Bank is providing sizeable resources, it won’t be enough.”
Mr Malpass said he was frustrated by commercial lenders’ reluctance to participate in a debt service suspension initiative for 73 of the world’s poorest countries which was announced last month by the G20 group of leading developed and developing nations.
He said that 14 countries had so far submitted requests to official bilateral creditors for repayment standstills, a further 23 were preparing to do so and another 17 were “seriously considering” it.
The initiative allows countries to request a standstill on repayments of country-to-country loans owed to G20 members until the end of this year, while preserving the value of the loans for later repayment. The G20 has called on banks and bondholders to participate on comparable terms.
Many bondholders, and some debtor countries, have resisted, saying that borrowers risk being cut off from international capital markets in future.
Mr Malpass said some countries had overestimated the market access risks.
“These are the poorest countries in the world and while their hope may be that commercial credit markets will reopen suddenly in 2020, the likelihood is that the pandemic and the economic shutdown in advanced economies will have long-lasting effects,” he said.
Instead, poor countries should concentrate on implementing economic programmes that would attract remittances and direct investment from abroad, while encouraging investment by domestic businesses, he added.
He also stressed the importance of reopening advanced economies as they begin to come out of lockdown, allowing a resumption of financial flows to poor countries in the form of remittances, trade and tourism.
“Those have been critical losses and will be critical parts of the reopening,” he said. “Interaction with advanced economies will be the single biggest step to recovery for the developing world.”
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