World Bank Group President David Malpass
Media Roundtable during Annual Meetings 2021
Washington, D.C., United States
Transcript
DAVID THEIS - WORLD BANK GROUP PRESS SECRETARY: Thank you, Kerry. Good morning, or afternoon, depending on your time zone. Thanks to everyone for dialing in; hope you're keeping well. Welcome to this call to kick off the 2021 Annual Meetings. World Bank Group President David Malpass will offer brief remarks and then we will take questions. But before that, a couple of housekeeping items.
First, this call and all accompanying content are under embargo until 9:30 a.m. D.C. time to coincide with the embargo for our International Debt Statistics, which you should all have received. Second, I know there’s a great deal of interest in discussions underway with the Board of the IMF. Because those shareholder meetings are ongoing, it would be inappropriate to entertain questions or speculate about any conversations going on among Fund Board members. So, I’m going to gently ask that we avoid any questions on issues related to that, please.
When we get to the Q&A, please identify yourself and your outlet. And please, one question per customer so we can try to get to all of you. Thanks again for joining. It’s going to be a busy week.
Mr. Malpass.
DAVID MALPASS – WORLD BANK GROUP PRESIDENT: Good morning. Thank you, David.
Good morning, thank you David. Good morning everyone. I’m glad you were able to join.
We are having discussions this week, throughout the Annual Meetings we will cover a broad range of development issues – including the economic outlook, growth, vaccines, debt, climate, and trade. World Bank financing operations will be discussed and also our climate change action plan, which aims to help reduce greenhouse gas (GHG) emissions and improve adaptation.
We expect global growth of 5.7% in 2021 and 4.4% in 2022, these are very similar to our projections in the June Global Economic Prospects report. Incoming high-frequency data point to slowing momentum in global activity amid persistent supply chain bottlenecks and COVID-19 surges.
Moreover, the global recovery remains dramatically uneven. The outlook is challenging for much of the developing world with lagging vaccination rates, rising inflation, limited policy support, too few jobs, and shortages that extend to food, water, and electricity.
The inequality in the recovery is getting worse across country groups. Per capita income in advanced economies is expected to grow nearly 5% in 2021, but only 0.5% in low-income countries. It will take many developing countries years to reach pre-pandemic income levels. Even after two years of recovery, by next year output in developing countries is expected to be nearly 4% below pre-pandemic projections, whereas the advanced economies will be caught up. In IDA countries, output will remain 5.6 percent below pre-pandemic projections by next year. The pandemic has already tipped millions of people into poverty.
We’re witnessing what I call tragic reversals in development across many dimensions. Progress in reducing extreme poverty has been set back by years – for some, by a decade. Median incomes have declined instead of risen. Women were disproportionately harmed during the pandemic. They are recovering less now in the recovery. There’s been a tragic loss in human capital, including children missing a year or more of school.
It’s vital that we address these head-on by redirecting policies in both the advanced economies and in the developing countries so that growth and investment are more widespread, less concentrated at the top, and broader improvements in living conditions can be achieved.
The highest priority now is to secure access to vaccines and accelerate their deployment. I chair the Multilateral Leaders Taskforce on COVID-19 vaccines, which includes Tedros, Ngozi and Kristalina. We’ll hold our fifth meeting shortly. We’ve published extensive data on pledges, actual vaccinations, and the ways to close that gap. We’ve urged governments that have sufficient doses to swap early deliveries to allow more vaccinations in developing countries.
The World Bank Group’s support for the poorest countries is at an all-time high, including grants and highly concessional loans to countries eligible to borrow from IDA. We have COVID-related health programs in nearly 150 countries and vaccination programs in 61 countries. We’re working to help countries secure more doses, deploy them effectively and communicate well to reduce hesitancy. I was recently in Sudan and Jordan and observed their vaccination efforts firsthand, which are accelerating. We have nearly a quarter of a billion doses under contract with Bank financing.
Another priority is to address debt challenges confronting many developing countries. Today, we’re also releasing the annual International Debt Statistics – or IDS – report for 2022. It identifies a significant 12% increase in the debt owed by low-income countries, which reached $860 billion.
As of mid-2021, over half of IDA countries – those are the world’s poorest countries – are in external debt distress or at high risk of it. A comprehensive approach, including debt reduction, swifter restructuring and more transparency is needed to help countries assess and manage their external debt risks and work toward sustainable debt levels and terms. These are fundamental to supporting health systems, education, and infrastructure and creating growth, investment, and prosperity. Enhanced and accelerated implementation of the Common Framework will be critical in achieving this much-needed debt transparency and sustainability.
An important agenda item for the Annual Meetings is financing needs to address the challenges I mentioned.
With the expected replenishment of IDA later this year, African heads of state have called for donors to be ambitious in providing their support for IDA’s critical mission. Financing needs in the poorest countries are urgent and will remain elevated in the years ahead, and a successful IDA20 replenishment is vital.
Resources will be an important topic of discussion this week, as we focus on prioritization and scalability. We will need the active participation of the public and private sectors, civil societies and foundations, indeed the whole international community.
I look forward to discussing these important topics with our shareholders this week.
I’d be happy to take your questions. Thanks again, all.
MR. THEIS: Thanks. Thanks very much.
if we can open up the lines for questions, please.
OPERATOR: Our first question is coming from the line of Andrea Shalal from Reuters. You may begin.
MS. SHALAL: Good morning, David. Thank you for doing this.
I know that you don’t want to speak about the IMF process that’s underway, but this is our first opportunity to speak with you about the Doing Business report and the decision to withdraw that and to cancel that product. Can you say a word or two about how—what is underway within the World Bank about how to develop an alternative to the Doing Business? Is that a priority? And what do you say to these commentators who say that the data irregularities, the charges that are in the WilmerHale report have damaged the reputation and credibility of other World Bank products, as well?
And then, just finally, I want to ask what the Board—what went into the Board decision to release that report? Thanks.
MR. MALPASS: Okay, a couple of points.
One is that the business climate is vital for development, and the World Bank as a group—and I say that because IFC is part of this; MIGA is part of this; and even ICSID, the settlement of disputes division of the World Bank; and I am President of all four of those organizations—are fundamentally guided to help countries expand their private sectors through good business practices. That’s going to be a permanent core of the World Bank, and what we’re developing is ways to help countries do that as best as possible.
This has been, of course, a core business of the World Bank through—for example, IFC does an exhaustive, extensive private sector diagnostic that feeds into our countries’ programming. I was just in Jordan. The private sector diagnostic is nearing completion for Jordan and is a core part of how we think about development in Jordan and also World Bank country programming in Jordan. We’ll be developing more aspects of that to help countries evaluate themselves, how they’re doing, and find ways to go forward. That’s a priority.
I appreciate that this is a challenge for the world to find ways that really help countries figure out why it is that small businesses aren’t forming, why it takes time, how do you move forward in terms of the logistics and transport sectors of the countries in order to allow the formation of businesses, how do they interact with state-owned enterprises, the whole concept of public-private partnerships, and how they can work. All of these are core topics of the World Bank Group and will continue, and they are integral to the climate change efforts that we’re doing.
We’ve been spending time in the runup to COP26 on private sector mobilization of capital: how does the private sector get engaged in the climate change efforts in countries. This is vital for those developing countries that are high emitters of greenhouse gas because it’s going to take active engagement of the private sector in order to get this done. And again, I repeat, it is a core mission of the World Bank Group that will continue and in fact build in the future.
Thanks. Next.
MR. THEIS: Thank you. Kerry, next question.
OPERATOR: Thank you. Our next question is from the line of Josh Zumbrun. Your line is now open.
MR. ZUMBRUN: Thanks. I also wanted to follow up on that, and I apologize, I know this isn’t the main thing you want to talk about, but it is our first chance to ask questions. I want to know kind of what steps the World Bank is planning to take to kind of rebuild credibility in some of the broader research efforts. This isn’t the first time that there have been concerns about influence that goes on among the research that the World Bank produces. And so, I’m curious if there’s a--if there’s a plan of action or things that are going to be done to try to boost the credibility of the research and that it’s not being, you know, pressured or meddled with in any way.
MR. MALPASS: We’ve taken several steps. I’ve written to staff, and that’s important to build morale. We announced last week the elevation of Carmen Reinhart within the organization. She’s now a part of the Senior Lead Management team.— There are 10 of us on it, counting myself. It’s five men, five women. It’s a great group. It’s really strong people guiding the World Bank, including the high priority on the research products.
I think we can build really strong research products. You’ve got two great examples that I’ve raised this morning: the Global Economic Prospects and the outlook numbers that I referred to, and also, the IDS. I encourage people to read the International Debt Statistics report. This is a flagship report out of the World Bank Group—out of DEC, Carmen Reinhart’s group. She’s now a Senior Vice President of the World Bank, part of Senior Management. And in reality, she was a vital force prior and will expand the interactions with the practice groups in the Bank and also with operations.
One of the things I’m trying to achieve—and we’ve done a whole host of issues to do that—is have good country outcomes for countries. When I first came in, we began and completed the realignment of the Bank to put more staff in the field and to bring them closer to the country program, and then the knowledge parts of the Bank are also an integrated part of that whole. So we’re taking this moment to reinforce that direction for the World Bank with all staff.
I met last week with the economics staff, with Carmen and her large economics staff, and recommitted myself and the Bank to a development agenda that is the mission of the Bank. I just want to really reinforce the importance of top-quality research and the Bank’s ability to produce that research in high volumes. Anyone looking at our publications knows how very many of those are out there. We’re going to continue that huge effort on behalf of people in developing countries and especially the people in the poorest countries.
The IDA countries are 75 that receive huge resources. I mentioned in my remarks grants and credits, very often zero-interest rate loans, as they find paths toward development. And economics is a core, central part of that, and Carmen will be a key part of that operations. Thanks.
MR. THEIS: Thank you. Kerry, next question, please.
OPERATOR: Thank you. By the way, Josh Zumbrun is from The Wall Street Journal.
Next question is from the line of Fabrice Node-Langlois from Figaro. You may begin.
MR. NODE-LANGLOIS: Yes, good morning to all. Thank you for the opportunity. My question is on the debt issue. Could you tell us, Mr. Malpass, what’s your main concern as far as external debt is concerned? And are you in favor in a kind of further suspension of debt service? Could it be possible? Is it something you’re going to discuss during the week?
MR. MALPASS: Thank you. So my main concern is—well, I’ll give you several. One is the size. The report this morning shows $860 billion of debt for low-income countries, and then that raises the concern about sustainability. How do you grow enough, especially with the other challenges that are going on in the world?
The second—and I want to put it in the same breath—is the lack of transparency in a lot of that debt. Contracts have been done where there’s non-disclosure clauses, so the people of the country often don’t know what the terms of the debt are and what it’s set to achieve. —What are they getting for that amount of debt?
Can I take a quick side trip? The core problem here is sovereign debt—there’s no bankruptcy process or international bankruptcy court or a process to work with countries where their debt has become unsustainable. I just traveled to Sudan. Their debt was unsustainable. At that time—this was developed in the 1990s—the HIPC Initiative, the Highly Indebted Poor Countries Initiative, did offer a path to countries whose debt was unsustainable. But in general, that’s not available to new countries now. The HIPC Initiative is old and nearing the end of its life, with a huge and very important restructuring of debt, more than 90 percent relief for Sudan as they continue through the HIPC decision point. I mention that because my concern is there’s not a process that we have to deal with the amount of debt and the lack of transparency that’s in the current debt.
And there was a second part of that question. He asked about suspension. That’ll be discussed in the context of the Common Framework. We’re looking for ways to have the implementation of the Common Framework be as effective as possible and to avoid the cliff that’s coming as DSSI expires at the end of this year. Remember, a year and a half ago, I proposed a debt moratorium for the poorest countries. The G20 implemented something called the DSSI, the Debt Suspension Initiative, and it suspended some of the countries’ debt—it wasn’t broad enough but suspended some debt—but that expires at the end of this year. I think there should be consideration by the world of what to do after January 1st, and a suspension is something that could be considered in the context of effective implementation of the Common Framework. Thanks.
MR. THEIS: Thank you. Kerry, next question, please.
OPERATOR: Thank you. Our next question is from the line of Jonathan Wheatley from Financial Times. Your line is now open.
MR. WHEATLEY: Hello there, everybody. Thanks very much for doing this.
I also wanted to ask about debt. You covered part of it there, David, but on the DSSI and the common framework, the effectiveness of the DSSI has been really quite small, hasn’t it? I mean, that 860 billion you’re talking about, I think, what, 10 or 12 altogether, suspended in payments last year? How are you going to make the common framework more effective? Because there was, what, 46 countries in the DSSI; there’s 3 countries in the common framework, I think. How is that--how are you going to make it more effective? And what way is there of getting the private sector involved? Because they’ve been--obviously, countries have been reluctant to ask for that because they don’t want to lose market access. So how do they retain market access while still taking part?
MR. MALPASS: Those are all good questions and points. If a country has unsustainable debt, there has to be a mechanism for having the private sector be involved. And the common framework urged that, but that has been difficult to achieve on the three countries that have asked for a Common Framework treatment--that’s Chad, Ethiopia, and Zambia. And those are current issues for the Common Framework.
The World Bank did a joint paper with the IMF on ways to improve the implementation of the Common Framework, and there was consideration of ways to speed up the process for developing countries or for the eligible countries that are considering applying for the Common Framework, and some of those are working their way through the process. For example, in Ethiopia there was a creditors committee formed under this idea of trying to accelerate the process to make it more effective for the developing countries. These are issues the G20 is discussing currently in the communique discussions that are going on under the G20. I’ll refer your question to them as well, how to make both the suspension initiative and the Common Framework itself more effective so that it actually works to reduce debt.
We do have this challenge that is I evident in today’s IDS report that here the G20 has been working to reduce the unsustainable debt burdens, yet the debt burdens of the low-income countries have risen by 12 percent in 2020 to $863 billion. And so, the world needs an effective--and I said this in my opening remarks--an effective way to reduce unsustainable debt, and we’re working hard in collaboration with the IMF and with the G20 to encourage and urge those efforts going forward, including involving the private sector.
I gave you the backstory there. There’s not a bankruptcy process for sovereign debt. It creates this oddity in law where if you are in most countries and a company can’t pay a debt, there’s a process to resolve that situation with some degree of transparency and there’s not a similar parallel process in the sovereign debt sphere. Thanks.
MR. THEIS: Thank you.
Next question, Kerry, please. Thanks.
OPERATOR: Next question is from the line of Shabtai Gold from Devex. Your line is now open.
MR. GOLD: Thank you for that. Good morning. I wanted to ask two questions here, one on debt as well, and one on the vaccines.
The first on debt is you’ve spoken a lot about low-income countries and how their debt has become unsustainable, but a lot of debt experts are warning that middle-income countries are also facing challenges and they really aren’t [audio interference] to help them exit the crisis and there’s a lot of growing poverty in middle-income countries. Do you have any plans to address that?
And then secondly, on the vaccines, the world seems to have missed the target of vaccinations for this year in low-income countries. I think vaccine--—the vaccination rate in Africa is still below five percent. What is your actual timeframe now to sort of speed that up, and how do you plan to reach the target? Thank you very much.
MR. MALPASS: Yeah, thanks. On debt, you’re right. The middle-income countries do face challenges. That is discussed in some detail in this report. We will be having another report, so I’ll foreshadow a really good World Bank report on transparency that’s coming out.
One thing I’ll mention is, the World Bank is very well-staffed to look at these issues. Carmen Reinhart is a world expert. Indermit Gill is the Vice President for an economics unit within the Bank that does the debt sustainability analyses. We recognize the problem, and we need to look for improvements in the debt carrying capacity of middle-income countries. Also, the transparency becomes very important. We worked on Ecuador a year ago, and there was a restructuring. But it was in the context of contracts that had non-disclosure clauses that make it very difficult to know the comparability of treatment within a restructuring arrangement. And so, these are impediments.
We’ve talked and encouraged the U.S. and the UK, because they house the big financial centers, to look at these problems of both the lack of bankruptcy process and the transparency indicators that are so problematic. One added challenge is the different nature of the debt. Oftentimes with the poorest--with the low-income countries, it’s bilateral debt, and so there’s a Paris Club process, an effort to bring in the non-Paris Club bilateral creditors, which include China and Saudi Arabia, into that process, and there’s some history of bilateral restructurings and rescheduling; whereas, for the middle-income countries, often it’s now--it’s debt or some kind of more complex loan structures that are harder to grapple with.
In the 1980s there was a huge Latin [America] debt crisis related to oil recycling, and a very important complicated step was how to move from bank-to-bank debt to bonded indebtedness with a discount. There’s not really very much of a process now to handle that immense problem that’s facing the middle-income countries. Thanks.
I’m sorry. There were actually two questions, vaccines and the mid targeting. The World Bank has, as I mentioned, 61 vaccine programs. We’ve built our program on various foundations. One is a very large amount of financing available to help countries both buy or acquire vaccines and then to deploy the vaccine in country using their own health systems or UNICEF. And so, we have contracts, and we’ve been successful in that with AVATT in Africa, where AVATT was able to secure contracts from Johnson & Johnson, and we’ve been delivering those heavily.
I mentioned to you that there’s a quarter of a billion doses under contract with World Bank contracts that are financed by the World Bank now, and we are moving to rapidly increase that. We share the frustration with the low level of vaccinations in Africa, and we’re working daily to increase the supply available through contracts that are sought by the countries. We think that’s a very important principle as we go into the future, that different countries are seeking different doses and different timing of doses, and that will probably extend into the future as the world confronts COVID. That relationship between the country and the manufacturer will be a critical building block, and that is the basis of the World Bank engagement on this topic.
I should mention our funding--our financing--or funding, a lot of it, much of it, is grants for the poorest countries, is also available to combat the hesitancy. That’s actually a major problem and needs to be done in country, country by country, with different communications programs. The financing helps the countries do that. Thank you.
MR. THEIS: Thank you.
I think we have time for one more. Go ahead, please.
OPERATOR: Thank you. Our next question, this comes from the line of Jon Hay of Global Markets. Your line is now open.
MR. HAY: Thank you, Mr. Malpass. You talked about the long tail of the pandemic and how it’s going to weigh on developing countries for a considerable time. In that context, are you concerned that, first of all, the potential reallocation of special drawing rights has taken a long time and there isn’t any clarity on that yet, and what do you expect on that issue?
And secondly, I wanted to ask you about the OECD-brokered tax agreement and whether you think that’s a genuine advance for developing countries or rather limited in its achievement.
MR. MALPASS: Thanks on that. Okay, I’ll answer those first and then I’ll go off on a tangent.
With regard to the SDRs, I’ll make the point that resources are very important -in handling this. The inequality is severe. I gave you data and ways to think about that in two ways. One is the advanced economies are growing; whereas, the developing countries on a per capita basis, the low-income countries only at 0.5, whereas the advanced economies, nearly 5 percent per capita growth. So, dramatic. And that also shows in the slowness of the return to pre-pandemic levels for the developing countries. So, we’ve got a major problem that people should recognize. Resources, external resources, are going to be important. This gets into the size of the ODA, the development assistance budgets that countries have, which I think are not large enough given the magnitude of the problem and the fiscal spending that’s being done by the advanced economies. More could be allocated to development assistance.
IDA is closing up, and so IDA will be--we hope to finalize in December, and we’re hoping that we can get enough donations from the donor countries to reach--to push IDA to a $100 billion of funding, which will be a huge add to the resources. IDA has the benefit of being non-fragmented, and so you have a central platform where the donors and the borrowers work together or the recipients of the grant work together on common goals, and that includes climate as a cross-cutting issue but also gender and many of the other core issues of development that the world is seeking. So, I wanted to mention that.
On the global taxation, I’ll just make one point, which is for the developing countries, the rules themselves, when they’re complicated, become yet one more obstacle to development, because the complexity, it’s challenging for them to meet in terms of their relationships with corporations, and so on. So, I hope that as the world writes the concept of the global minimum tax or the minimum tax, that they will take into account the capacity of developing countries and especially the poor countries, the insufficiency in the capacity to do complex tax transactions.
And I want to digress or add to the question, why the sources on inequality. And one point I’ll make is that the way that recovery process is set up right now by the advanced economies--and I mentioned it in my opening remarks--it concentrates the resources at the top end. And that includes the various types of fiscal stimulus that are working often through existing channels. It’s very hard for new entrants in that. And the central bank stimulus is operating through the bond market, which represents the upper end of the wealth curve by buying bonds that are already very high-rated bonds, by buying corporate and mortgage securities that are--that are often representing or the assets of people at the high end of the wealth or income curve. And so, that creates challenges for that long tail. So, I appreciate the question. I think this is a core question of development right now, all the prospects are that this inequality problem is going to extend.
And as I mentioned in my opening remarks, it’s getting worse. The inequality, meaning the developing countries are being left further and further behind the advanced economies because or related to the policies that are being done in both the advanced economies, as I just mentioned, but also, difficulties that developing countries have in putting in place better growth policies. These are all topics of the discussion this week at the World Bank/IMF Annual Meetings. Thanks all for joining today.
David?
MR. THEIS: Thank you very much.
Just a reminder before we wrap that all content is under embargo for another five minutes until 9:30 a.m. D.C. time. Have good meetings this weeka and hope to talk to all of you soon. Thanks very much.
Kerry, we’re ready to close.
[End recorded session]
