BRIAN CHEUNG: The vaccine rollout is the first step to an economic recovery here in the United States, but how about all the other countries that have more limited access to the vaccines? Will some of the most impoverished countries be able to narrow the inequality that's been widened by this pandemic? Here with a policy perspective on this and more is the president of the World Bank, David Malpass. Good morning, President Malpass.
DAVID MALPASS: Good morning, Brian and everyone.
MR. CHEUNG: Let's kick things off with the COVAX initiative. This is something that the World Bank is participating in. It's a stockpile of vaccines to distribute to over 40 countries. What's the update on the funding and the distribution under that program? Is it enough to meet the needs of some of the most indebted kind of impoverished countries?
MR. MALPASS: I don't know the answer to that question. The transparency of the relationships between the manufacturers and COVAX, and from COVAX to the various countries, I think can use more transparency: How many contracts, how many doses are under contract?
What the World Bank does is work directly with countries to provide funding. Some of the countries are using that funding to make the co-payments to COVAX. Some have been able to get supply through that channel. Others go directly to the manufacturers and use the funding in order to get vaccines into the countries.
What we are trying to do is have as many people vaccinated as quickly as possible in a fair and safe way. We are pushing forward. I'm hoping we will have 40 countries with funding available through the World Bank financing contracts within the near-term timeframe, so that begins to create the flow.
The key here is to have more transparency in all of the contracts that are between the manufacturers and the intermediaries, so the World Bank Group and others can find ways to provide additionality.
One of the things we haven't been able to do yet is to buy new manufacturing capacity, because it's not clear how much of the existing capacity is already tied up in options, for example, and in other production commitments.
MR. CHEUNG: What's really challenging about this question is that this is all happening at a time when some of the advanced nations that are manufacturing these vaccines are grappling with how much they should be keeping for their own domestic citizens, and how much they should be shipping across the border. We saw here in the United States on Monday that the White House clarified they don't want to share vaccines at the moment with Mexico, for example. Are you satisfied with the level of cooperation that not just the United States but other global bodies and major manufacturers, are handling the vaccine distribution--given those kind of fairly valid concerns?
MR. MALPASS: There is a lot of communication going on among the various players, the big countries, the manufacturers, COVAX, the World Bank. I think that is moving along. We had the G20 meeting on Friday of the finance ministers and the Central Bank governors and I spoke there about the importance of the transparency of contracts. That would help immensely if there could be more disclosure of how much has been committed. Then you can work on getting more commitments and more of that going to the poorer countries. I think there's communication going on, on it. But what we need now is to simply have more supply and more shipments going to the people that are most in need.
MR. CHEUNG: Let's talk about what's at stake here. The World Bank projections that are now forecast have poverty rising to 733 million people in this pandemic. That would imply throwing about 90 million people into poverty and that would erase years of progress that we had before the pandemic. We last spoke here on Yahoo Finance in August and at the time, we were mentioning that you were really worried about those countries not having the social safety nets to deal with that. Has the picture for those countries gotten better or worse since the last time we spoke?
MR. MALPASS: Some have gotten better and some have gotten worse. There is a big group of countries that we call FCV – fragile, conflict and violent – and that continues to go on, creating situations of grave concern. For example in Yemen, in the Tigray province of Ethiopia, and across the Sahel, conditions are still very difficult from a food security standpoint and from the health standpoint, very directly. Security is also a very real issue for hundreds of millions of people around the world. I was pleased to see in Nigeria the release of the girls that had been abducted in late February. That was a positive sign but it is amid these negative signs of insecurity and deeper poverty.
The solution or the direction that the world needs to head, I think, is toward a greener, more resilient, more inclusive recovery. How do you get a V-shaped recovery for most of the world, not just for the advanced economies? I think that takes more effort, more planning, more resources and also changes in the poorer countries as well. It is a change that is needed really worldwide.
MR. CHEUNG: You mentioned more resources, and a lot of the things that you just laid out are issues or conflicts that existed even before the COVID-19 pandemic. Now, normally the spend from the World Bank on projects is about $42 billion. But my understanding is that the World Bank had about $71 billion in commitments to the poorest countries through some of your programs, so give us a picture of the types of projects that the money is being used to fund specifically within the context of what we're dealing with, with a pandemic? And how do you pick and choose what to fund when honestly everyone's in need right now?
MR. MALPASS: The World Bank is somewhat unique in being able to tap into global markets in large size. So we will raise as a group, the World Bank Group, over $100 billion this year, and that is devoted to development. That is to a range of income levels but all of them on the developing countries side and much of it going to the poorest countries in the form of grants and very concessional resources.
It is a big support mechanism. What we are trying to do is to have the most impact that we can make on the people of the countries.
For example, we were very happy recently to make progress in Sudan. Sudan is three-times as big as Texas. It's got twice as many people as Texas, and yet it is extremely poor. They had been running a dual exchange rate system where special people got a special price for the exchange rate. They unified that in late February, which opens up avenues to much more economic progress. That's a good step, a big step. I wish that it could be done also in Nigeria and Ethiopia. These are big populous countries that are running two exchange rate systems—one for some people and some companies, and then a worse one for most of the people of their countries. Unifying those exchange rates would be a big step forward. Remember in China's economic development, that was the critical step in 1993, when they eliminated the dual exchange rate system, and that ushered in a period of very fast growth that was good for China, good for the people of China, and also good for the whole world, as poverty rates went down in China.
I mentioned this to the G20 meetings on Friday, and I hope we can make progress on that. That gives you an example. In all of the developing countries, there are specific issues that they are confronting, that have relatively specific answers. The World Bank works directly in the country through a country director and system within the World Bank to try to encourage the most impactful changes.
That extends of course to climate change. Over the next five years we will spend $100 billion on climate change efforts in developing countries. The World Bank is by far the biggest financier globally of climate-related efforts by countries. The goal that we have is to have them be as impactful as possible, meaning you can spend a lot of money and not have much impact, but it would be much better to spend the money and have big impact in terms of lowering greenhouse gas production in countries. Also for the developing countries, they need adaptation because most of the greenhouse gases are coming from the advanced economies. They haven't found pathways to reduce it. So we need to have developing countries be prepared for the changes going on in their climates.
MR. CHEUNG: I want to go back to the climate agenda in a second, but you mentioned that you have had a direct line to the G20, you actually addressed the G20 very recently. What did you tell the fiscal and monetary policymakers in those virtual rooms, if you will, about how to specifically address the debt servicing needs, relief needs for some of those countries that you laid out? Obviously the economic situation in those countries that you had laid out--also countries like Venezuela, Myanmar maybe in the future—what did you tell those global leaders about how to address the global needs right now?
MR. MALPASS: My comments are available on our website and also on Twitter where my handle is @DavidMalpassWBG, so I publish those comments.
The critical aspect is to have more transparency in the debt that countries have. It's very important for the people of the poorer countries to know what contracts have been entered into by their governments. Both the creditors and the debtors should be doing more disclosure of the contracts. In that way you can see if the contracts are having a good impact for the people of countries.
We work specifically at the country level to strongly encourage disclosure of the terms of contracts, which has not been done very thoroughly to date. We are making progress on that, and the G20 was supportive in 2020 of more transparency efforts, but there is still a long way to go on that.
We also want to identify those that have unsustainable debts. It's helpful if you can identify that early, rather than letting it grow into a bad situation. Identify it early, and then work with the creditors to reduce the net present value of the debt. That is the effort underway now under the auspices of both the G20, and the development committee that gives input into the IMF and the World Bank activities. We are working closely with the IMF to try to identify countries that have an unsustainable level of debt. That requires trying to find out what all the debt contracts are of these countries. Who signed them? What are the terms? What is the interest rates? And can there be relief offered by the various creditors?
MR. CHEUNG: When we talk about room for fiscal spending obviously it is interesting to see how the industrialized countries were able to spend up to 15-20% of their GDP on stimulus packages, whereas the poorest countries already squeezed on the amount of debt that they have were only able to spend less than two percent by some measures. Within the context of climate initiatives, the World Bank has a very active agenda on that front. What does that mean for those kind of less developed countries that might not have the fiscal space to pass aggressive, greener initiatives, for example?
MR. MALPASS: We are working with the countries directly on what are called the NDCs, the nationally determined contributions, which is the relationship that countries have with the Paris Agreement.
One of the goals is to have the countries embed the NDCs into their development plan so they get a coherent whole, and they actually intend to make progress on it through adaptation efforts—being prepared for climate changes—and then also through mitigation. If they are using coal, if they are using high carbon emitting electricity and have alternatives, then let’s look for a transformation that moves them to lower carbon emissions in their countries.
Frankly, most of the carbon emissions are coming from the advanced economies. That is where a lot of the work has to be done.
I wanted to mention also, as we think about the money spent in the poor countries from their own budgets: it is very important to have as much as possible go to education, to health, to nutrition, to food sources, because these are indeed poor countries. We need to look for new financing mechanisms for climate change efforts, also for the debt reduction efforts that I mentioned to you. Those all free up fiscal space for the countries to do climate change efforts, health and education spending. And I think a lot more progress needs to be made on that in order to get more spending at the country level.
Brian, if I may: the inequality and unfairness of the current global system is striking. The negative effects are most felt by the vulnerable, by women, by children, by the poor countries. That is part of the unfairness. The response or the stimulus mechanisms that have been done by the advanced economies—and I've talked about this before—they are very oriented toward helping people in the upper end of the income scales of their countries rather than the lower income levels. For example, the central banks buy bonds. They borrow from the markets and buy bonds that are issued by very well-heeled corporations or by their own governments. That really points the stimulus at the upper crust of the societies and makes the inequality problems even more so.
MR. CHEUNG: Yes, and that contributes definitely to the K shaped recovery. I just wanted to ask lastly: you mentioned earlier in the conversation about climate change and how the advanced economies are the ones that are contributing most of emissions that we face. Are you encouraged to see the Biden Administration rejoin the Paris Agreement? It's worth pointing out to our viewers that you were appointed by the Trump Administration which had a very different stance. Your term is going to last until 2024 at the World Bank. Do you see a tide change in what the White House stance is? Is that constructive to the World Bank's agenda on climate?
MR. MALPASS: I am pleased with the things that the Biden Administration is saying about the need for real transformation in the greenhouse gas area. They have identified that there are around 15 countries that are the major emitters. There has to be a tackling of that problem worldwide, and particularly by the bigger, advanced economies of their emissions. I was glad to see that effort.
I've also been very glad to see the support that's offered by the Biden Administration to the resource commitments worldwide. Some of this is going to take money. Some of it takes transparency and actual pushing forward, and the Biden Administration has been very supportive of each part of the agenda to get more development for the poorest countries.
I think it's going to be a good relationship, and the World Bank certainly looks forward to working with everyone within the US government, and also with all of our shareholders.
MR. CHEUNG: All right, we will have to get an update when that does happen, but World Bank President David Malpass here on Yahoo Finance—thank you again for joining us this morning.
MR. MALPASS: Thanks, Brian. Nice to see you.
Watch the full interview here