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Speeches & Transcripts June 3, 2020

Remarks by World Bank Managing Director for Development Policy and Partnerships, Mari Pangestu, at the Global Investors for Sustainable Development (GISD) Alliance Virtual Meeting

I would like to first of all thank Sida and the United Nations (DESA) for inviting the World Bank Group to this important forum and the opportunity to talk about how we can jointly build back better in the face of the COVID 19 Pandemic.

As we are all aware, we are about to experience the deepest global recession on a scale not seen in decades. The World Bank will be releasing our Global Economic Prospects forecasts next week, which showed negative growth for a large number of countries, advanced and developing in 2020.

The impact is felt most by the poor and vulnerable with 73 million people pushed into extreme poverty, nearly half in South Asia and one third in Sub Saharan Africa, and another 175 million people pushed into poverty; 80% of the world’s 1.6 billion informal workers are affected; and 1.5 billion children will be out of school.

The crisis threatens to erase decades of economic progress and poverty reduction. Today’s disruptions in trade and schooling may lead to tomorrow’s unemployment and diminished human capital, especially for women and girls.

Decisive development support and global coordination is critical for a sustainable and inclusive recovery.  The financing gaps for developing countries will be exceptionally high and likely to persist in the medium term.

There is urgent need to step up support by all of us. As for the World Bank Group, we have acted fast and at scale.  The first phase $14 billion response is to deliver health and economic emergency assistance and as of today, we are implementing this support, in over 100 developing countries, home to more than 70 percent of the world’s population.

Looking ahead, we will provide up to $160 billion in financing for the next 15 months.  Out of which IDA, our fund for the poorest, will provide $50 billion of that total in grants and highly concessional credit terms.

This will be used firstly on the shorter-term response which focuses on protecting the poor and vulnerable through social protection programs, such as scalable cash transfer programs which have used digital technology in its delivery; income and food security support; protecting jobs and ensuring the sustainability of firms, especially SMEs.

In the more medium term the focus will be on recovery. This is about strengthening policies and institutions to get back on the path of growth, job creation and reduction of poverty. In the recovery there is an opportunity to rebuild in a resilient, sustainable and inclusive way. This could include building of low carbon infrastructure, more resilient health and food safety systems, and elimination of distorting subsidies such as fuel and agriculture subsidies.  There is great opportunity for us to work with private investors such as this alliance to understand how we can best our resources for a green and blue recovery and deploy technology and innovation.

The financing gap to respond to the impact of the COVID 19 will be large. The WBG has taken a number of steps to address this.  First by calling with the IMF for a debt suspension for all official bilateral creditors for IDA countries which is now a G20 initiative. This allows fiscal space to the 35 countries that are participating, to implement programs to respond to the social and economic impact of the crisis. However, much more needs to be done on debt and fiscal sustainability as well as bringing back private capital and investment. On the last point let me share three things.

First, I want to mention the pivotal work done by the International Finance Corporation. Karin Finkelston will talk about it later today. The IFC has been instrumental in our response, especially in countries affected by fragility and conflict. These are usually the first to get cut off from financial markets and global supply chains during a crisis. Billions in private capital have left emerging markets ($100 billion in the first month after the pandemic hit), making the work of development finance institutions and likeminded investors more important.  We look forward to collaborating more with the private sector such as all of you here today to develop financial innovations such as blended finance structure.  An example is an upcoming infrastructure program in Colombia, which will build safe roads and strengthen supply chains.

Second, one of the greatest challenges that investors – like many of you here today – face in emerging markets is the supporting policy framework for sustainable investment and lack of investable opportunities.  

On the policy framework, there is the opportunity in the recovery agenda that WBG is working with our client countries to have a low carbon and inclusive development path, such as on energy and other reforms, and ensuring inclusive job opportunities.  There is also the work with G20 on the role of institutional investors in advancing the sustainable development agenda, such as the work on Infrastructure as an Asset Class Agenda.

On investable opportunities, again we hope that in the recovery and rebuilding better process, that there will be increased investment opportunities such as low carbon transportation infrastructure and renewable energy.  There is also a need to consider how to fund the projects which have great impact on social and human capital.

We also hope that the Global Infrastructure Facility, hosted at the World Bank and where a number of GISD members sit on the advisory council to help build networks of sustainable infrastructure investments that are attractive to private capital, can also be utilized.

With more than 90 infrastructure programs and projects that the GIF is supporting in the upstream preparation phase, it is working hard to provide investors, like you, de-risked investment opportunities informed by rigorous analyses, environmental, social and governance safeguards, and fair risk allocation. This Facility can be used in identifying sustainable infrastructure in the recovery phase.

Third on supporting the capital that will be needed. The World Bank will use all its fire power, including the funds it can disburse and leveraging on its capital.  For over seventy years the World Bank has been mobilizing private investment to support sustainable development through the global capital markets, by issuing triple-A rated World Bank (IBRD) bonds. IDA, our fund for the poorest, has accessed the capital markets for the first time in 2018, offering investors the opportunity to invest in lower-income countries.

In April 2020 we issued over $15 billion in just one week, to raise awareness for SDG 3 [Good Health and Well-being]. That included our largest ever bond, an $8 billion issuance that attracted almost 200 investors. This is the largest ever US dollar denominated bond issued by a supranational.

This event was co-hosted by Sida, and we have now issued a 11.5bn Swedish kronor Sustainable Development bond.

We would like to thank the support of GISD community who have provided input to the design of financial instruments to finance development and sustainability.

Given the large financing gap and the limited fiscal space that many developing countries will have, there will be a need for private investment to come in the recovery state. It will be important to crowd in private participation in delivery of certain public services and infrastructure. There is the opportunity to build back better and that it is commercially viable.

I would like to conclude my remarks by commending the GISD members, Sida, and the UN for convening the private sector and the development community. I look forward to hearing your thoughts and impressions.

Thank you.