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World Bank says financial crisis likely from pandemic, China not fully committed to debt relief

The World Banks said Coronavirus is morphing into a major economic crisis, with very serious financial consequences.

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World Bank says financial crisis likely from pandemic, China not fully committed to debt relief

The World Bank has warned that the coronavirus outbreak is turning into a major economic crisis and could likely see the emergence of a financial crisis from the pandemic.

This disclosure was made by the World Bank Chief Economist, Carmen Reinhart, during an interview with Bloomberg Television.

Reinhart during the interview said, “This did not start as a financial crisis but it is morphing into a major economic crisis, with very serious financial consequences. There’s a long road ahead.

READ: World Bank predicts rebound of Sub-Saharan Africa’s economy next year

Reinhart, who assumed her new role in June, is best known for her work with then-Harvard colleague Kenneth Rogoff on the last financial crisis in their 2009 book “This Time Is Different: Eight Centuries of Financial Folly.” It made the pair the go-to resource on the history of government defaults, recessions, bank runs, currency selloffs, and inflationary spikes.

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READ: World Bank says remittances to Nigeria, other LMICs will drop by 20% in 2020

When asked whether central banks buying bonds to keep yields low is ultimately a zero-sum game when everyone’s doing it, Reinhart said, “This is a war. During wars, governments finance their war expenditures however they can and right now there are dire needs. The scenario we are in is not a sustainable one.’’

READ: Cryptos: Nigerian financial experts talk risks associated with trading digital assets

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The World Bank had said that before the onset of the Covid-19 pandemic, the rising debt levels were already a cause of concern, particularly in many of the world’s poorest countries.

Reinhart’s statement is coming after the G20 countries while responding to a call from the World Bank and the International Monetary Fund (IMF), endorsed the Debt Service Suspension Initiative (DSSI) in April 2020 to help about 73 of the poorest countries manage the impact of the Covid-19 pandemic.

READ: IMF: Global economy is now projected to fall by 4.4%

However, the initiative which is through at least the first half of 2021, falls short of the World Bank’s call for a full-year extension.

China is owed almost 60% of the money that the world’s poorest nations would be due to repay this year, according to World Bank data.

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READ: Football: AC Milan announces loss of €195million

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The World Bank President, David Malpass, in August, said that China has made many loans to developing countries with terms that aren’t transparent and at higher interest rates than the nations can afford.

READ: COVID-19: IMF Chief predicts $345 billion financing gap in African countries 

He had pointed out that the time has come for a much more comprehensive approach to tackling the debt crisis facing the people in the poorest countries, one that involves debt-service suspension as well as broader efforts such as debt-stock reduction and swifter debt-restructuring, grounded in greater debt transparency.

READ: Ruffer ’50 cent’ makes $2.6 billion, as Coronavirus strikes financial market

Asked about China not participating in the debt-suspension relief, Reinhart said the nation was in fact involved, just “less than fully.”

The China Development Bank, a major lender, hasn’t joined the effort, nor have private-sector creditors, she said. “Full participation is something we should strive for but unfortunately haven’t yet seen.”

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

2 Comments

2 Comments

  1. Zhuubaajie

    October 17, 2020 at 6:56 pm

    In any economy there are different levels of lenders, whose risk tolerance and the risk adjusted loan rates are scaled. World Bank loans carry lower rates, but those loans come with many strings attached. Developing nations that can get WB loans, did. But when those loans are insufficient, they turn to higher rate loans from others, such as China. Those nations are the best judge of what loans they want and can afford. The loans made by Chinese banks are mostly COMMERCIAL in nature, with appropriate pledged security to guarantee the principal and repayments. The Chinese banks bargained for and got the payment secured, fair and square. Why is it the WB’s business?

  2. Dan M

    October 19, 2020 at 5:48 am

    Spot on Zhuubaajie. I think the more important thing is whether ‘poor countries’ have properly assessed their needs and repayment plans to support the loans taken. No one issues loans with the intent to lose it. It is critical that skilled and experienced hands handle national planning and execution. Anything short of that results in value destruction.

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Federal Government declares Thursday October 29 public holiday, to mark Eidl-Mawlid

Federal Government has declared Thursday, October 29, 2020 as a public holiday to mark the Eidul-Mawlid.

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The Federal Government has declared Thursday, October 29, 2020 as a public holiday to mark the Eidul-Mawlid.

This disclosure was made by the honourable Minister of Interior, Rauf Aregbesola.

Ogbeni Rauf Aregbesola congratulated muslim faithfuls both at home and abroad for the opportunity to observe this year’s celebration. He further enjoined them to show love, patience and perseverance.

In the light of the aforementioned facts, the minister urged Muslims to detest or shun lawlessness, looting and daylight robbery which undermine National security and safety.

Ogbeni Aregbesola, who described the youths as the hope and future of the nation, advised them to deepen democracy and not dampen it.

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For him, it is with more democracy that we can overcome our challenges, noting that the challenges of nationhood that we face are surmountable if we work through the democratic process.

What you should know:

Eid Mawlid is an annual celebration for Muslims meant to marked the birthday of the Prophet Mohammed.

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President Buhari reappoints Yakubu as INEC Chairman for second term

President Muhammadu Buhari has reappointed Professor Mahmood Yakubu as Chairman of the Independent National Electoral Commission (INEC).

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INEC to introduce election results viewing portal, INEC headquarters gutted by fire

President Muhammadu Buhari has reappointed Professor Mahmood Yakubu as Chairman of the Independent National Electoral Commission (INEC) for another five-year term.

This disclosure was made by the Special Adviser to the President on Media and Publicity, Femi Adesina, in a statement titled, ‘President Buhari nominates Prof Yakubu as INEC chairman for a second term in office’.

The statement read, “President Muhammadu Buhari has presented the Chairman of the Independent National Electoral Commission, Prof Mahmood Yakubu, for a second term in office.’

Details later…

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#EndSARS protest: Hoodlums loot 110 tractors in Yola

Hoodlums looted the North East Commodity Association (NECAS) Warehouse In Yola state.

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#EndSARS protest: Hoodlums loot 110 tractors in Yola

Due to the ongoing demonstrations against police brutality tagged “EndSARS” protest, hoodlums have stolen at least 110 tractors and other farm implements from the North East Commodity Association (NECAS) Warehouse In Yola.

Confirming this development to TheVanguard, was the chairman of NECAS, Alhaji Sadiq Umar-Daware, who also revealed that the hoodlums also broke into the main warehouses of the Rice Farmers Association and Maize Farmers Association of Nigeria, carting away valuables which include farm inputs and fertilisers.

READ: CBN to offer Niger Delta rice farmers single-digit loan 

What they are saying

Commenting on the latest development, Mr. Umar-Daware, said: “They did not only took tonnes of produce, but they also made away with the farm inputs for the dry season farming and the offices of Rice Farmers Association, Maize Farmers Association of Nigeria (MFAN) and the NECAS were also looted and vandalised.

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READ: CBN Commences distribution of grants and inputs worth over N700 million to cocoa Farmers

Commenting further, he said: “What they took away include tonnes of rice, beans, maize, sorghum and millets, and computers, tables, chairs, office equipment, water dispensers and cash,’’ he said.

Mr. Umar noted that complaints have been forwarded to security agencies, although the organization is still awaiting a formal response. He, however, urged people in Adamawa and its environs to be on the lookout for anybody in possession of the tractors, and report to NECAS, RIFAN and MFAN officials for recovery and necessary action.

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READ: CRR: Banks suffer N917.5 billion debits in latest CBN action

READ: Nigeria’s $1.5 billion steel plant set to produce 1 million MT of steel annually

What you should know

NECAS is involved in agriculture-related services and human capacity development across the North-East region States of Adamawa, Bauchi, Borno, Gombe, Taraba, and Yobe.

Since its establishment in 2018, the association has expanded its scope of activities, especially through the Federal Government, CBN’s Anchor Borrowers’ Programme (ABP), mechanisation drive, and partnerships with development agencies.

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