World

Development
Report 2022:
Finance for
an Equitable
Economy
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Released by- World Bank
About the report-
• The report examines the central role of finance in the economic recovery from the Covid-19
pandemic.
• It also highlights the consequences of the crisis which are most likely to affect emerging
economies, and advocates a set of policies to mitigate the interconnected financial risks
stemming from the pandemic and steer economies toward a sustainable and equitable
recovery.
Key findings of the report-
• The COVID-19 pandemic has triggered the largest global economic crisis in more than a
century.
• In 2020, economic activity contracted in 90% of countries, with the world economy shrinking
by about 3%, and global poverty increasing for the first time in a generation.
• Governments enacted a swift and encompassing policy response that alleviated the worst
immediate economic impacts of the crisis. However, the government response also
exacerbated a number of economic fragilities.
• It highlights four pressing economic risks which hampers a robust and equitable recovery.
o Rising nonperforming loans
o Delayed resolution of distressed loans
o Tighter access to credit
o Elevated levels of sovereign debt
• The recovery from the crisis will be as uneven as its initial economic impacts, with emerging
economies and economically disadvantaged groups needing much more time to recover
pandemic-induced losses of income and livelihoods.
• The emergency response undertaken by governments has also created new risks such as
dramatically increased levels of private and public debt in the world economy, which may
threaten an equitable recovery from the crisis if they are not addressed decisively.
• Scenario during pandemic -
o More than 50% of households in emerging and advanced economies were not able to
sustain basic consumption for more than three months in the event of income losses.
o Similarly, the average business could cover fewer than 55 days of expenses with cash
reserves.
o Many households and firms in emerging economies were already burdened with
unsustainable debt levels prior to the crisis and struggled to service this debt once the
pandemic and associated public health measures led to a sharp decline in income and
business revenue.
o In 2020 temporary unemployment was higher in 70% of all countries for workers who
had completed only a primary education.
o Income losses were also larger among youth, women, self-employed, and casual
workers with lower levels of formal education.

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 o Women, in particular, were affected by income and employment losses because they
were likelier to be employed in sectors more affected by lockdown and social distancing
measures.
o Larger firms entered the crisis with the ability to cover expenses for up to 65 days,
compared with 59 days for medium-size firms and 53 and 50 days for small and
microenterprises, respectively.
• The size of the fiscal response to the crisis as a share of the gross domestic product (GDP) was
almost uniformly large in high-income countries and uniformly small or nonexistent in low-
income countries.
o In middle-income countries, the fiscal response varied substantially, reflecting marked
differences in the ability and willingness of governments to spend on support programs.
• In 2020, 51 countries, including 44 emerging economies—experienced a downgrade in their
government debt risk rating.
• Although households and businesses have been most directly affected by income losses
stemming from the pandemic, the resulting financial risks have repercussions for the wider
economy through mutually reinforcing channels that connect the financial health of
households, firms, financial institutions, and governments.
o Because of this interconnection, elevated financial risk in one sector can spill over and
destabilize the economy as a whole.

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 • Unresolved Non Performing Loans (NPLs) depress the capacity of banks to support the
economic recovery with fresh lending and disproportionately affect underserved groups that
are usually the first to be cut off from credit, exacerbating imbalances in financial access.
• A lack of NPL transparency can also weaken trust in the financial sector and may, in extreme
cases, escalate into a systemic banking crisis that can lead to a severe, prolonged recession
that has consequences for poverty and inequality.
• Although concerns about NPLs often center on formal banks, the microfinance institutions
(MFIs) that primarily serve low-income households and micro-, small, and medium enterprises
(MSMEs), especially in low-income markets, face similar challenges.
• Legal and institutional frameworks for managing bankruptcy are an effective way to ease
pressure on households and businesses overburdened by unsustainable debt from the
pandemic.
• However, a sudden rise in nonperforming loans (NPLs) and bankruptcies stemming from the
inability of firms to meet their repayment obligations poses a significant challenge to the
capacity of insolvency systems to resolve bankruptcies in a timely manner, even in advanced
economies with strong legal frameworks and effective institutions.
• If over indebtedness rises rapidly, the absence of effective legal mechanisms to declare
bankruptcy or resolve creditor-debtor disputes invites political interference in the credit
market in the form of debt relief mandated by the government.
• The average total debt burden among low- and middle-income countries increased by
roughly 9 percentage points of gross domestic product (GDP) during the first year of the
pandemic, compared with an average annual increase of 1.9 percentage points over the
previous decade.

Recommendations
• Increasing transparency and reducing the share of non-performing loans will enable financial
institutions to remain stable, well-capitalized, and able to provide credit, especially to low-
income households and small businesses.

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 • Effective insolvency procedures, including out-of-court options, can reduce the social costs of
widespread debt distress, prevent the misallocation of resources, and limit government
interference in debt resolution.
o Delayed action can reduce access to credit, discourage entrepreneurship, and delay
the recovery of economic activity.
• Innovations in digital finance and lending models can help financial institutions to reliably
assess and manage risk and continue to provide credit, especially to low-income borrowers.
o Households that maintain financial access are more likely to sustain consumption, while
businesses can invest and create jobs.
• The proactive management and reduction of sovereign debt can free up fiscal resources
needed to support the recovery.
o Delays in addressing debt sustainability are associated with protracted recessions,
rising inflation, and reduced spending on social safety nets, public health, and
education, which have disproportionate impacts on the poor.

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MCQs based on report:
Q.1) Which among the following organization has recently (April 2022) released “World Development
Report 2022: Finance for an Equitable Economy”?
*[1] World Bank
[2] International Monetary Fund
[3] World Economic Forum
[4] United Nations Development Programme
[5] None of the above
[Marks] 1
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]
• “World Development Report 2022: Finance for an Equitable Economy”, is published by World
Bank.

Q.2) Which among the following are pressing economic risks which hampers recovery as per the
recently (April 2022) released “World Development Report 2022: Finance for an Equitable Economy”?
[1] Rising nonperforming loans
[2] Tighter access to credit
[3] Elevated levels of sovereign debt
[4] Delayed resolution of distressed loans
*[5] All of the above
[Marks] 1
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]
• It highlights four pressing economic risks which hampers a robust and equitable recovery.
o Rising nonperforming loans
o Delayed resolution of distressed loans
o Tighter access to credit
o Elevated levels of sovereign debt

Q.3) According to the recently (April 2022) released “World Development Report 2022: Finance for
an Equitable Economy”, which among the following are the recommendations of the report?
[1] Increasing transparency and reducing share of non-performing loans
[2] Effective insolvency procedures
[3] Innovations in digital finance and lending models

6|P a g e W WW. E D U T AP . CO . I N QUERY? HELLO@EDUTAP.CO.IN/ 8146207241

[4] Proactive management and reduction of sovereign debt
*[5] All of the Above
[Marks] 1
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]
• Increasing transparency and reducing the share of non-performing loans will enable financial
institutions to remain stable, well-capitalized, and able to provide credit, especially to low-
income households and small businesses.
• Effective insolvency procedures, including out-of-court options, can reduce the social costs of
widespread debt distress, prevent the misallocation of resources, and limit government
interference in debt resolution.
o Delayed action can reduce access to credit, discourage entrepreneurship, and delay
the recovery of economic activity.
• Innovations in digital finance and lending models can help financial institutions to reliably
assess and manage risk and continue to provide credit, especially to low-income borrowers.
o Households that maintain financial access are more likely to sustain consumption, while
businesses can invest and create jobs.
• The proactive management and reduction of sovereign debt can free up fiscal resources
needed to support the recovery.
o Delays in addressing debt sustainability are associated with protracted recessions,
rising inflation, and reduced spending on social safety nets, public health, and
education, which have disproportionate impacts on the poor.

Q.4) As per the recently (April 2022) released “World Development Report 2022: Finance for an
Equitable Economy”, which among the following country had the largest share of fiscal stimulus to
GDP ratio?
[1] Italy
[2] Japan
[3] Germany
[4] India
*[5] USA
[Marks] 1
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]

7|P a g e W WW. E D U T AP . CO . I N QUERY? HELLO@EDUTAP.CO.IN/ 8146207241

 • Italy had the largest fiscal stimulus to GDP ratio at around 46%.

Q.5) Which among the following statement is wrong as per the recently (April 2022) released “World
Development Report 2022: Finance for an Equitable Economy”?
[1] The COVID-19 pandemic has triggered the largest global economic crisis in more than a century.
[2] In 2020, economic activity contracted in 90% of countries, with the world economy shrinking by
about 3%, and global poverty increasing for the first time in a generation.
*[3] The emergency response undertaken by governments has not created any new risks.
[4] The recovery from the crisis will be as uneven as its initial economic impacts.
[5] None of the above
[Marks] 1
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]
• The COVID-19 pandemic has triggered the largest global economic crisis in more than a
century.
• In 2020, economic activity contracted in 90% of countries, with the world economy shrinking
by about 3%, and global poverty increasing for the first time in a generation.
• The emergency response undertaken by governments has also created new risks such as
dramatically increased levels of private and public debt in the world economy, which may
threaten an equitable recovery from the crisis if they are not addressed decisively.
• The recovery from the crisis will be as uneven as its initial economic impacts, with emerging
economies and economically disadvantaged groups needing much more time to recover
pandemic-induced losses of income and livelihoods.

8|P a g e W WW. E D U T AP . CO . I N QUERY? HELLO@EDUTAP.CO.IN/ 8146207241

Q.6) What is the central theme of the recently (April 2022) released “World Development Report
2022: Finance for an Equitable Economy”?
[1] Data
*[2] Financing
[3] Cryptocurrency
[4] Ukraine War
[5] None of the above
[Marks] 1
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]
• The report examines the central role of finance in the economic recovery from the Covid-19
pandemic.

Q.7) What is the number of emerging countries which have experienced downgrade in their
government debt risk rating in 2020, as per the recently (April 2022) released “World Development
Report 2022: Finance for an Equitable Economy”?
[1] 23
[2] 36
*[3] 44
[4] 51
[5] None of the above
[Marks] 1
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]
• In 2020, 51 countries, including 44 emerging economies—experienced a downgrade in their
government debt risk rating.

Q.8) Which among were the consequences observed during the Covid-19 pandemic as per the
recently (April 2022) released “World Development Report 2022: Finance for an Equitable Economy”?
[1] More than 50% of households in emerging and advanced economies were not able to sustain basic
consumption for more than 3 months.
[2] Income losses were also larger among youth, women, self-employed, and casual workers.
[3] Women, in particular, were affected by income and employment losses.
[4] In 2020 temporary unemployment was higher in 70% of all countries for workers who had
completed only a primary education.
*[5] All of the above
[Marks] 1
9|P a g e W WW. E D U T AP . CO . I N QUERY? HELLO@EDUTAP.CO.IN/ 8146207241
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]
• Scenario during pandemic -
o More than 50% of households in emerging and advanced economies were not able to
sustain basic consumption for more than three months in the event of income losses.
o Similarly, the average business could cover fewer than 55 days of expenses with cash
reserves.
o Many households and firms in emerging economies were already burdened with
unsustainable debt levels prior to the crisis and struggled to service this debt once the
pandemic and associated public health measures led to a sharp decline in income and
business revenue.
o In 2020 temporary unemployment was higher in 70% of all countries for workers who
had completed only a primary education.
o Income losses were also larger among youth, women, self-employed, and casual
workers with lower levels of formal education.
o Women, in particular, were affected by income and employment losses because they
were likelier to be employed in sectors more affected by lockdown and social distancing
measures.
o Larger firms entered the crisis with the ability to cover expenses for up to 65 days,
compared with 59 days for medium-size firms and 53 and 50 days for small and
microenterprises, respectively.

Q.9) According to the recently (April 2022) released “World Development Report 2022: Finance for
an Equitable Economy”, what is the number of days larger firms had ability to cover their expenses
when the pandemic started?
[1] 50 days
[2] 53 days
[3] 59 days
*[4] 65 days
[5] None of the above
[Marks] 1
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]
• Larger firms entered the crisis with the ability to cover expenses for up to 65 days, compared
with 59 days for medium-size firms and 53 and 50 days for small and microenterprises,
respectively.

10 | P a g e W W W . E D U T A P . C O . I N QUERY? HELLO@EDUTAP.CO.IN/ 8146207241

Q.10) According to the recently (April 2022) released “World Development Report 2022: Finance for
an Equitable Economy”, what is the approximate percentage points of GDP with which the average
total debt burden of low and middle income countries increased during first year of pandemic?
[1] 2.0
[2] 5.0
[3] 7.0
*[4] 9.0
[5] 13.0
[Marks] 1
[Negative Marks] .25
[Tag]
[Answer Time]
[QUESTION TYPE] Multi_choice
[SOLUTION]
• The average total debt burden among low- and middle-income countries increased by
roughly 9 percentage points of gross domestic product (GDP) during the first year of the
pandemic, compared with an average annual increase of 1.9 percentage points over the
previous decade.

11 | P a g e W W W . E D U T A P . C O . I N QUERY? HELLO@EDUTAP.CO.IN/ 8146207241