Private debts pose hidden risk to developing countries, World Bank warns

Private debts pose hidden risk to developing countries, World Bank warns

WASHINGTON- Developing countries must quickly strengthen their financial sectors, the World Bank said on Tuesday, warning that risks were rising along with inflation, interest rates and lack of transparency about sovereign and private debts.

The World Bank underscored its longstanding concerns about lack of transparency about Chinese lending and collateralized loans in the sovereign debt sector, but also called out growing private sector risks in its latest World Development Report.

The bank's surveys showed 46% of small and medium-sized businesses in developing countries expected to fall behind on debt payments within six months, but the number was twice as high in some countries, chief economist Carmen Reinhart told Reuters in an interview.

Reinhart said she was keeping a close eye on private sector debt developments in bigger emerging markets like India, South Africa, the Philippines, and Kenya, where more than 65% of small and medium-sized companies expected to be in arrears.

And on the sovereign side, Turkey, whose credit rating was downgraded to "BB-" by ratings agency Fitch last week, had been in crisis for several years and could "well be the straw that broke the camel's back," she said.

She said massive fiscal and monetary support, coupled with moratoriums on bank loans and generous