Dikhyaa Mohanty 
Developing countries face growing risks from financial fragility created by the Covid-19 crisis and non-transparent debt, the World Bank has said in a report, urging policymakers to focus on creating healthier financial sectors.
According to the World Development Report 2022: Finance for an Equitable Recovery it stated that “Risks may be hidden” because the balance sheets of households, businesses, banks, and governments are tightly interrelated. 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.
World Bank Group President David Malpass stated that the risk is that the economic crisis of inflation and higher interest rates will spread due to financial fragility. Tighter global financial conditions and shallow domestic debt markets in many developing countries are crowding out private investment and dampening the recovery.
Surveys of businesses in developing countries during the pandemic found that 46 per cent expected to fall into arrears, the report showed, warning that loan defaults could now “sharply increase,” and private debt could quickly become public debt, as governments provide support.
