Malpass said he had been worried in general about
collateralized arrangements that often gave a creditor a better
hand. "So the details are still coming on Suriname and whether
it turns out to be sustainable, but it's really important for
the countries to look carefully at what they're giving up."
(Reporting by Andrea Shalal; Editing by Chizu Nomiyama)
(Adds comments on Suriname)
By Andrea Shalal
NIIGATA, Japan, May 12 (Reuters) - The risk of a U.S.
default is adding to problems facing the slowing global economy,
with rising interest rates and high debt levels already choking
back investments needed to fuel higher output, World Bank
President David Malpass said on Friday.
Group of Seven (G7) finance officials meeting in Japan
discussed the "very high importance" of raising the U.S. debt
limit and averting the negative repercussions of a potential
default on U.S. government debt for the first time ever.
"Clearly, distress in the world's biggest economy would be
negative for everyone," he told Reuters on the sidelines of the
G7 meeting. "The repercussions would be bad to not get it done."
U.S. Treasury Secretary Janet Yellen on Friday reiterated
that failure by Congress to raise the $31.4 trillion debt limit
would result in economic and financial catastrophe, and urged
the Republican-controlled House of Representatives to agree to
lift the federal debt limit.
Malpass said there had been discussion during the G7
meetings about the need to boost productivity and growth, and
also deal with a high debt overhang facing a growing number of
countries.
Global growth was slated to fall below 2% in 2023, and could
stay low for several years, he said. One of the big challenges
was that advanced economies had taken on so much debt that it
would take a lot of capital to service it, leaving too little
investment for developing countries, he said.
"And that means a prolonged period of slow growth. That's a
big worry, and especially for people in poorer countries," he
said. "The world's in a stressful spot, but I think the
financial systems are holding up. The big question is growth,
how do you get more growth and productivity."
Malpass said it was urgent to move forward with restructurig
the debts of countries that had asked for help, and welcomed
"some progress" on Ghana, the fourth country to seek relief
under the Group of 20 Common Framework. Reuters reported on
Thursday that Ghana's official creditors are poised to grant
financing assurances and form a committee co-chaired by France
and China, key steps for the nation to secure a $3 billion
International Monetary Fund (IMF) loan.
He said it was frustrating to see the slow pace of
progress on the overall debt restructuring front, noting how
difficult it was for countries to attract investment until they
had agreements in place to make their debt more sustainable.
Malpass welcomed progress made during the first two
meetings of a new Global Sovereign Debt Roundtable that includes
China, the world's largest sovereign creditor, and private
sector creditors. A third meeting was now planned in June, he
said.
"To actually get to these debt reductions is so important
... for poor countries that have hit the wall in terms of
unsustainable debt. It's important to get it done as soon as
possible."
Malpass expressed concern about a new deal being finalized
by Suriname's government and international bondholders to
restructure nearly $600 million in debt.
Sources familiar with the deal say it includes a clause
that would put a percentage of Suriname's future oil revenues in
an escrow account through 2050.
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