WASHINGTON: The World Bank said in a research that developing countries are increasingly vulnerable to financial fragility caused by the Covid-19 crisis and non-transparent debt, asking governments to focus on constructing stronger financial systems.
According to the World Development Report 2022: Finance for an Equitable Recovery, "risks may be hidden" because home, company, bank, and government balance sheets are all intertwined.Access to credit is hampered by high levels of non-performing loans and concealed debt, which "disproportionately" affect low-income people and small companies, according to the report.
"The fear is that due to financial fragility, the economic crisis of inflation and increased interest rates may spread," warned World Bank Group President David Malpass. "In many emerging nations, tighter global financial conditions and thin domestic financing markets are squeezing out private investment and slowing the rebound." Working toward broadened access to credit and growth-oriented capital allocation is vital, according to the World Bank's chief.
"This would allow smaller, more dynamic businesses - and industries with higher growth potential - to invest and create jobs," he said.