High interest rates can cause problems for highly indebted countries
Marrakesh. The World Bank’s chief economist has warned that interest rate hikes could cause problems for countries struggling to manage debt.
In the past few months, the U.S. Federal Reserve, the European Central Bank and national banks around the world have also raised rates to curb high inflation, warning that the rise could last longer than normal.
The International Monetary Fund (IMF) says the global economy remains resilient despite the ongoing cost of living crisis and the ongoing war in Ukraine.
“Despite all these shocks, we have not seen any of the major economies really in trouble. “It may be good news that the rate hike campaign is likely to end here,” said Indramit Gill, chief economist at the World Bank.
He said at a press conference held during the IMF-World Bank annual meeting held in Marrakesh, Morocco, “The problem now is that the high interest rate you mentioned and the economic growth due to it is slowing down a lot.”
Gill recalls another long period of high interest rates in the 1970s, when about 24 economies went into crisis. He said, “We should expect this tough cycle to take a long time. He said, “We have estimated that some countries will face problems.”
World Bank President Ajay Banga said that there is no doubt that inflation has started to decrease, but the rate will remain high. “This could be a complicated event in many ways for investors and also for people who have been accustomed to a low interest rate environment for years,” Banga said. (RSS/AFP)
Published On: Oct 11, 2023 20:27 PM