Developing countries face growing risks from the financial fragility created by the COVID-19 crisis and non-transparent debt, the World Bank said in a report on Tuesday, urging policymakers to focus on creating healthier financial sectors. The World Bank report highlighted the risks of spillover effects given the interrelated nature of households, firms, financial sector institutions, and governments. High levels of non-performing loans and hidden debt impair access to credit, and disproportionately reduce access to finance for low-income households and small businesses, the report noted.

The report called for greater efforts to manage distressed loans, including relaxing bankruptcy mechanisms, out-of-court solutions for small businesses, and addressing sovereign debt distress. Low-income countries were urged to manage government debt.

Source: VOV5