By Karin Strohecker

LONDON, (Reuters) – Poorer countries in the developing world will likely need quicker G20 debt relief Tuesday as a growing number of people are being squeezed due to rising indebtedness, slowing growth, and increasing levels of poverty.

In its Global Economic Prospects Report, the World Bank stated that half of all low-income countries were in debt or in high-risk of default due to the pandemic inflicted recession of 2020.

According to the report, debt in developing countries and emerging markets has risen at an unprecedented rate over the past three decades. Growth in low-income economies will strengthen from 4.9% to 5.9% in 2022, while it is projected that growth in these economies will increase to 5.9% in 2023. However, income per capita in both 2022 and 2023 is still expected to decline to pre-pandemic levels.

The World Bank report stated that “it is probable that additional debt relief will be required if growth continues to remain subdued” and called for the international community to ensure this happens in an equitable, but effective manner.

G20’s common framework was established in November 2020. The G20 focuses on debt relief through maturity extensions and interest rates reductions to countries who are eligible for repayment moratoriums under Debt Service Suspension Initiative.

But, there has not been much progress.

“The framework needs to provide faster debt relief to be effective — the first country that requested treatment under the Framework made the request in January 2021 and the process has yet to be completed,” the report said.

The World Bank stated that formalizing implementation using a transparent timeline and clear rules can speed up the process. While debtor countries should implement policies to strengthen their fiscal frameworks, and improve transparency in debt,

Markets and institutions became more vulnerable to financial stress due to rising and increasing levels of debt, particularly in countries with weaker fiscal positions or high sovereign debt.

The World Bank highlighted China, where financial stress could trigger a disorderly deleveraging of the property sector https://www.reuters.com/markets/rates-bonds/chinas-shimao-says-it-has-no-deal-sell-shanghai-plaza-shares-slump-2022-01-11.

According to the report, “A deleveraging storm could result in a sustained downturn of the realty sector with substantial economy-wide spillovers through lower property prices, decreased household wealth and plummeting local revenues.”