Development cooperation institution the World Bank president David Malpass in a speech to leaders of the Group of Twenty (G20) developed countries emphasised the importance of climate financing to transition carbon-intensive industries, debt relief and rescheduling, and global vaccination progress to support global recovery.
The World Bank's Climate Change Action Plan includes ambitious new targets for climate financing and steps to have as much impact as possible in improving the trajectory of greenhouse-gas emissions and saving lives and livelihoods through adaptation.
"The plan integrates climate and development, expanding our diagnostics, increasing the focus on results and supporting countries with their nationally determined contributions (NDCs) and long-term strategies. We are working to help countries wind down subsidies to carbon intensive industries and secure a just transition away from coal. We’ve invited close collaboration with the International Monetary Fund (IMF) and other partners, and our financing flows will be aligned with the Paris Agreement," he said.
He welcomed a decision by the G20 to extend the World Bank-led Debt Service Suspension Initiative (DSSI) through 2021. The World Bank is also working closely with the IMF to support the implementation of the G20 Common Framework.
"Covid-19 will leave lasting scars on developing countries, from closed schools and physical stunting of children to lost jobs, the depletion of savings and assets, and growing debt overhangs. The crisis came on top of persistent development challenges, including stagnant median incomes, fragility and violence, and damage caused by climate change," he said on April 7.
However, the World Bank is helping countries respond to the Covid-19 pandemic, and achieved a record 65% growth in commitments in 2020, and a doubling of trade and working capital finance to help fill the banking vacuum that hit private sectors. Also, in 2020, Bank-wide commitments topped $100-billion for the first time, and it expects new vaccination operations in 50 countries by mid-year.
"Debt relief efforts are providing some welcome fiscal space, but international finance institution International Development Association (IDA) countries need major new resources too, including grants and highly concessional resources. From April to December 2020, the first DSSI period, our net transfers to IDA and least developed countries were close to $17-billion, of which $5.8-billion were on grant terms.
"Our new commitments were almost $30-billion, making IDA19 the single largest source of concessional resources for the poorest countries and the key multilateral platform for support," said Malpass.
Greater transparency is an important element in these debt efforts. He urged all G20 countries to disclose the terms of their financing contracts, including reschedulings, and to support the World Bank’s efforts to reconcile borrower’s debt data more fully with that of creditors.
"Participation by commercial creditors and fuller participation by official bilateral creditors will be vital. I urge all G20 countries to instruct and create incentives for all their public bilateral creditors to participate in debt relief efforts, including national policy banks. I also urge G20 countries to act decisively to incentivise the private creditors under their jurisdiction to participate fully in sovereign debt relief efforts for low-income countries."
The good news is that there is faster global growth driven primarily by the US, China, and India having strong rebounds, Malpass said during a press conference at the G20 Spring Meetings.
"There's also the concern about inequality in terms of vaccinations and in terms of median income that is not going up very fast for some of the countries and may even be going down. There is also the interest rate differential, where poor countries face much higher interest rates and they haven't gone down the way global interest rates have done.
"There is an inequality in terms of the bankruptcy process, which is not available to sovereign countries, so the poorer countries do not have a way out of these very heavy debt burdens, and there is also inequality in terms of access to credit with a lot of the stimulus going to the upper end. People that do not have pristine credit ratings, for example, or small businesses, new entrants, women that would like to start a business, are having great difficulty getting credit."