2023-10-11 11:33:06
Marrakech (awp/afp) – Rising interest rates to contain inflation might put countries with high debt levels in “difficulty”, the World Bank (WB) warned on Wednesday.
“The problem is that because of high interest rates, growth is slowing down a lot” and “is slowing down to levels that are much lower than before the crisis,” noted Indermit Gill, the chief economist of the institution, during a press conference.
He referred to the rapid rise in interest rates by the US Federal Reserve (Fed) in the 1970s to draw lessons for the current period.
“It took a long time, it didn’t last one or two years. So we should expect this (monetary) tightening cycle to take a long time as well,” he said.
“This has left some 24 economies bankrupt. So you can expect countries that have not managed their debt levels well to have problems. You can expect countries to have problems.” , he predicted.
Rising rates increase borrowing costs and close doors for indebted countries.
The American Central Bank (Fed) may have to raise its rates further, and keep them at a high level for a long time, one of its officials insisted on Wednesday.
“The policy rate may have to rise further and remain restrictive for some time,” Michelle Bowman, a Fed governor, said during a speech in Marrakech. Fed rates are currently in the 5.25-5.50% range, the highest since 2001.
The European Central Bank (ECB) recently estimated that the battle to bring inflation back to the 2% target would continue, requiring it to maintain a restrictive monetary policy.
According to forecasts from the International Monetary Fund (IMF), global inflation should still be at 5.8% at the end of 2024, and still at 3% in advanced economies, before returning close to the 2% target over the course of the year. of the year 2025.
World Bank President Ajay Banga said Wednesday that the likely continuation of high rates around the world “may represent a complicated event for investments as well as for people who for years have become accustomed to a low-rate environment lower”.
Tuesday, the Ivorian Minister of the Economy, Adama Coulibaly, president of the G24, bringing together developing countries, called on international financial institutions to “cancel the debt of the most vulnerable and poorest countries”, mainly held by the “multilateral development banks and (the) IMF”.
“This cancellation only concerns the poorest countries, we are not asking that it be canceled for all countries,” insisted Mr. Coulibaly.
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