World Bank calls on creditors to cut poorest nations’ debt payments

World Bank calls on creditors to cut poorest nations’ debt payments

Cooperation needed to avoid turning Covid-19 into deeper economic crisis, says economist

World Bank's chief economist, Carmen Reinhart, said move would allow poorer countries to pay for vital medical and food supplies.

Photograph: Ruben Sprich/Reuters

Private sector lenders to some of the world's poorest countries should agree plans to reduce debt payments or risk turning the Covid-19 pandemic into a deeper economic crisis, the World Bank has said.

Speaking before the start of the G20 finance ministers meeting this weekend, the bank's chief economist, Carmen Reinhart, said banks and hedge funds that lend to the developing world should cooperate with moves to cut debt payments, allowing poorer countries to pay for vital medical and food supplies.

China, which is the largest single creditor to developing world countries, would also need to be included in debt reduction plans, she said.

The call follows a report showing that the International Monetary Fund, which acts as a lender of last resort to financial stressed countries, has allowed hard-pressed countries to spend $11.3bn (£8.9bn) of IMF money intended for health budgets and food imports to service private sector debts. The World Bank is a Washington-based international organisation that lends to developing nations.

The G20 countries, a grouping formed after the last