Jim Yong Kim: Default could be devastating
A U.S. default on its debt would be “devastating” for the global economy and would hit the poor particularly hard, World Bank president Jim Yong Kim told CNN’s Richard Quest Wednesday.
Quest spoke to Kim in Washington D.C., where the world’s economic and political world leaders have gathered for the annual meetings of the World Bank and International Monetary Fund.
The meetings come in the shadow of a partial shutdown of the U.S. federal government and amid fears the world’s largest economy will be unable to pay all its bills later this month due to failure by politicians to raise the country’s borrowing limit.
We often forget it has a direct impact on the poorest
Jim Yong Kim , World Bank president
On Tuesday, President Barack Obama said he was ready to talk about Republicans’ demands in an effort to end the stand-off, but he wanted Congress to first end the government shutdown and raise the debt ceiling, even if just for a short period.
Kim said he did not want to comment on the politics but those involved in the wrangling needed to remember that “even if there is something heroic right at the end…it’s having an impact on the little guys.”
The debt crisis had the potential to be “devastating,” with the threat of default the “greatest concern” he said.
The closer the U.S. got to default, the greater impact it would have on the globe’s poorest — such as the rice farmer in South East Asia, or young person in the Middle East trying to start a business — as the cost of capital rose. “We often forget it has a direct impact on the poorest,” Kim said.
The World Bank had prepared contingency plans to support countries if the U.S. debt crisis further roiled global markets, Kim said. “We’re ready to move…to support the poorest countries,” he said. “The muscle memory is in place, we are ready to go.”
Meanwhile, the World Bank is focused on halving poverty from 18% to 9% by 2020, Kim told Quest. Extreme poverty is in retreat but the World Bank had set an interim target to ensure it was able to reach its goal of bringing poverty down to 3% by 2030.
“We have a huge amount of work to do,” but an interim goal would ensure the World Bank remained on track, Kim said. Those who remained in poverty beyond that are among the hardest to reach, and would require focused assistance, Kim added.