ALAN RAPPEPORT: Can you hear me okay?
DAVID MALPASS: Okay, that's really good. Go ahead, Alan. How have you been? I’m happy to give you opening, or what would be most useful for you? Well, let me give a very short opening. You know, we’ve been very active. I am two years now at the at the Bank. With COVID, that added even more to the urgency that we brought in the first year. You know, in the first year there was lots of talk about, we did the four waves of debt report. And we did a lot on the quality of our country programs. We did the realignment of the staff to help put people closer to the country programs, and then the pandemic hit. e, you know, redoubled efforts. We've now been in calendar year 2020, the deliveries or the commitments, you know in the bank are up 65% from 2019. That's a big surge. That's the biggest surge ever for the World Bank—bigger than what happened in 2009.
MR. RAPPEPORT: Yeah, could you talk a little bit, a little bit about sort of how the pandemic, you know, has changed—obviously changed the whole world—how's that changed this job for you? What you were expecting going into it? And you know, how you sort of had to obviously like everybody dealing with this sort of, you know, rise to the occasion?
MR. MALPASS: We needed to have programs in a lot of countries, because COVID hit everyone with the same disease at roughly the same time. We put in place a fast-track approach in May of 2020, which was able to reach over 100 countries, with the ability to finance personal protective equipment, masks, and oxygen and ventilators, and so on. And that also was a big program for the Bank, in that it involved healthcare across a lot of a lot of sectors. And the IFC was involved in the private sector application of those.
And then in August we recognized that there was going to be a prolonged massive effort on vaccinations. We worked to expand our health care programs to include vaccinations. That was way before vaccines had been invented. We were very early among global organizations with our board in October of 2020 with a full set of vaccination operational guidelines. That's what passed in October, and the first set of that was to do assessments of countries to see if they would be ready if vaccines were invented--would they be ready to deliver the vaccine. We've done that in over 100 countries, which is really important preparation for the actual vaccination efforts. We've now passed 11 operations through the board. And we're moving to a more streamlined approach where there will be the case that not every operation will have to be individually passed by the board. We’ll be able to pass them as, as groups of operations. By midyear we'll have 50 countries with World Bank financing operations specifically for vaccination programs. This is the world's biggest ever vaccination programs that we're embarking on, working with the international community. We work with Gavi, with COVAX, with UNICEF, with WHO on this. But the core of it is the financing available from the World Bank, that the countries can buy the vaccines that they need and actually deliver/administer them.
MR. RAPPEPORT: You've talked a fair amount about fairness in terms of vaccine distribution. Is the rich—does the rich world need to be doing more to make sure that poor countries have access to it? And have they been, you know, do they deserve any criticism for having for hoarding the vaccine?
MR. MALPASS: I don't so much want to comment on the moral challenges facing the world. People are dying in every country—countries have to have to have to figure out what they want to do. What I can engage in is the financing that's available when the advanced economies begin to free up their capacity. We've worked with each of the pharmaceutical manufacturers to have supplies available once the contracting—once there's more transparency from the advanced economies or the host countries on how much free, how much supply is going to be freed up. And countries are moving at different speeds—the US has a lot of production and is delivering vaccines rapidly. I'm optimistic that the US will be able to free up some of its production for the for the developing world.
MR. RAPPEPORT: And just sort of speaking about the divergence between developing world and advanced economies: do you see global growth divergence and rates of divergence affecting emerging markets this year? And does the US need to be taking any action to soften that blow?
MR. MALPASS: There is an inherent challenge in that the stimulus, being provided by the advanced economies, is mostly passing through the advanced economies. It won't reach the developing countries for a period of time. Of course, global growth helps the developing world, as well as the advanced economies. That’s one of the biggest things that the US does to help people in poorer countries is grow itself—it creates markets for the goods that are produced in the developing world. The US is also both through the government sector is a big funder of development assistance, including the World Bank, and through the US private sector, is by far the world's biggest private sector funder. I'm talking about through foundations and through charitable undertakings, and so on. And that has a big impact. And then I want to mention a third which is remittances. People working outside of their own borders and sending money back to their countries is one of the biggest sources of cash flows for the developing world—and one that the World Bank wants to help make more efficient. You know, there's a sometimes a big spread that's charged as money is transferred. We look for ways to have it a bit more efficient, so that money can get back to families in their home countries.
MR. RAPPEPORT: I wanted to shift a little bit. Well, there's one more thing on fiscal support. There's been some talk, Secretary Yellen actually today in her speech is going to talk about sort of urging countries not to pull back on fiscal support too soon, and the potential you know that if some do it's going to create global imbalances. Is that something that you're concerned about?
MR. MALPASS: The value of fiscal support depends heavily on the quality of the spending being done. And it's important that countries of all levels of income do all they can to make both their government spending be well allocated, and also the private sector capital flows be well allocated. I've expressed concern about some of the stimulus that's being done in the advanced economies is being concentrated on higher income levels. And one of the challenges for the advanced economies—really it's for everyone—is to have fiscal stimulus that benefits the economies, the economy as a whole. And that means small businesses, that means new people entering the market that aren’t highly skilled. So support that broadly supports job opportunities.
MR. RAPPEPORT: What changes in US policy priorities since Biden administration has taken over have been helpful or less than helpful for the Bank's mission so far this year?
MR. MALPASS: The Bank's core mission is poverty alleviation and shared prosperity. That means median incomes going up, that means better living standards for people in poor countries including food availability, climate preparedness. So, the Biden administration policies have been very supportive of that mission. We have the Spring Meetings coming up and there's substantial participation by Secretary Yellen and Secretary Kerry in the World Bank's Spring Meetings. I'm pleased with that.
MR. RAPPEPORT: You know climate change has been obviously a huge issue. A lot of people were kind of concerned when the Trump administration offered you for the job, that you would be a climate skeptic, that you wouldn't fully embrace the Bank's mission, and I think people have been kind of pleasantly surprised that you have made it a big priority and you have spoken out about the challenge of climate change, very regularly and loudly. Did people misjudge you going into job or have your views evolved since you have taken over?
MR. MALPASS: I tried to speak clearly from the very first one, when I joined the Bank on the importance of the climate change issues within the development agenda. Janet Yellen and I appeared at the Bipartisan Policy Center, and both debt and climate were key issues in that. And Alan, going back further, you know, I was heavily involved in World Bank and development issues in the 1980s, in the Reagan administration and testified on environment. The US was instrumental in helping the World Bank create the environment division, which now handles both biodiversity and handles the climate change issues. In China now, we have a heavy, a large focus – we've refocused our program in China on global public goods and especially marine plastics, which is a core issue in environment, but it also gives context to the climate change issues that also involve global public goods.
I have tried to be very focused on these issues since my first interactions with World Bank policy starting in 1984. One of my first trips for the US government was to Guatemala and Honduras, with a development assistance programs at the core of that. One of the things we're working on now and will be discussed at the Annual Meetings, is the refugee challenge and the immigration challenges that are faced.
Any other questions on that Alan? I know that's it. Any other questions on that?
MR. RAPPEPORT: Yeah, just on climate, I mean – the Climate Change Action Plan, I think this came up a little bit on the call at 10, but maybe you could say a little bit more about why the plan doesn't commit to halting funding for fossil fuel projects.
MR. MALPASS: So, the plan makes major progress on reducing greenhouse gases, so it's focused on results that benefit, or that integrate development and climate in order to reduce greenhouse gas emissions. That has been one of the frustrating parts of the climate experience in recent years has been the continued increase in greenhouse gas emissions for a lot of countries. So, we're focused on moving toward a lower carbon in environment for the large emitters, some of whom are developing countries. Many, most of them are advanced economies but some are the larger developing countries. And so that will be a focus of the plan.
MR. RAPPEPORT: That's the direction you're going? In terms of halting funding for fossil fuel projects eventually? Or it's just sort of too soon for it or not necessary?
MR. MALPASS: As we discussed, key missions for the bank are poverty alleviation and shared prosperity, and one part of the UN SDGs is electricity access for people. I think the high priority is to find ways to dramatically lower the carbon output of the large emitters. That's going to be a joint global effort, as we think about the trajectories in some of the big developing countries. That's going to be a huge challenge.
And the World Bank is working with countries on their NDCs, their nationally determined contributions, which are part of the Paris Agreement, which will create the foundation for the reduction in greenhouse gas emissions. That is that desire result of these programs.
I do want to say, as I did on the call, the IDA countries, which are 75 countries, produce only 4% of the world's greenhouse gas emissions. And for those countries, the adaptation, being able to respond to climate changes is a high priority for those countries. I don't want to have that get lost in the shuffle. The World Bank is that the center of the adaptation effort for the poorest countries.
MR. RAPPEPORT: Is the World Bank and IFC considering using financial institutions that are committed to net zero in their treasury operations?
MR. MALPASS: I don't know the answer to that.
MR. RAPPEPORT: That's something that's come up or ever been discussed?
MR. MALPASS: There are various efforts worldwide in the financial sector, to identify, to define net zero and also to define carbon credit offsets that help companies achieve or declare net zero. I discussed this in my LSE speech, the London School of Economic speech. I'll refer you to that section. Because one of the big challenges for economics is to try to find ways that the global carbon credit markets can develop in ways that actually reduce carbon, not just notional reductions in carbon. That provides a challenge in the direction. What the World Bank is doing in this Climate Change Action Plan is committing to the alignment of our financial flows with the Paris Agreement.
MR. RAPPEPORT: I wanted to ask sort of related to that. How do you see debt relief? How would you like to see debt relief structured for countries that are dealing with climate impacts? We understand that the Biden Administration is working on green debt relief proposals.
MR. MALPASS: I mentioned in remarks today, the importance of finding fiscal space that addresses health and addresses education, and also that addresses climate issues. For the poorest countries that primarily is adaptation. To the extent that debt relief efforts can help countries become more sustainable in terms of their debt, that helps them create fiscal space needed for adaptation. And for those developing countries that are large emitters of greenhouse gas, it can also help fund the transition to lower carbon.
MR. RAPPEPORT: So, what you talked about finding space does that means additional debt relief, so they can focus on climate?
MR MALPASS: Yes. We use the term fiscal space because that gets into revenues and spending side, some part of good climate change works on ... many policies work on both sides of that equation. For example, countries, many countries are still subsidizing use of fossil fuels. And we're working to reduce the subsidies for fossil fuels that would allow more fiscal space for those countries. If debt becomes more sustainable, they can borrow more from their own domestic credit markets and also from international market. They all kind of go together.
On debt relief, we've got the DSSI operating, and the Common Framework. DSSI provided the deferral of debt payments. And, in addition, the World Bank provides very large net positive flows directly to many of the same countries. The DSSI eligible countries have benefited in 2020 from roughly $5 to $6 billion of deferrals. They'll still have to pay the debt but at a later date, with interest. And then the DSSI has been extended through the end of this June and that's adding a maximum of some $7 billion. That would be if all of the creditors participated. And then, relative to that, the World Bank is providing $16 billion of net positive flows for the DSSI eligible countries.
All of those combined are part of the fiscal space needed now to address the pandemic and other things, including climate change. But then, going forward, there will still be several countries that have unsustainable debt burdens. The Common Framework is working to have debt burden sharing between both the private sector and the public and the official bilateral creditors on that part to actually provide debt relief that will help the countries be sustainable.
MR. RAPPEPORT: What more do you want to see from China on this front or on pandemic response in general?
MR. MALPASS: I've talked a lot about the importance of transparency in debt. As investment contracts are done, as countries do foreign aid, and also as they do foreign direct investment through their private sectors, it's important that the debt be transparent and also the investment contracts that are done with sovereign governments be transparent. I’m making that distinction because private companies working with private companies may have reasons for proprietary kinds of arrangements, but where the challenge right now is – is both private and official creditors working with sovereigns, with the governments of developing countries, in ways that aren't fully transparent. That's a priority and we are working to reconcile the data. The World Bank has a lot of data on the various official debts of countries and we're working to reconcile that with the creditors, to get the creditors to look at it and validate that that's indeed what they owe because some of the contracts, because of these non-disclosure clauses that I've been discussing, they're not even allowed to disclose that there is a debt that has arisen between the two countries or the two entities.
MR. RAPPEPORT: A couple more, quick ones, if I could. I'm sure you have to run.
MR. MALPASS: An important one on China that I want to mention is their role in global public goods. As China operates both in terms of marine plastics, in terms of the greenhouse gas emissions, those have impacts globally and I’ve been pleased to see China working on those with more and more energy.
MR. RAPPEPORT: I'm sorry I didn't mean to interrupt you either. Sorry about that. You came from, you know, a US administration that viewed multilateral institutions skeptically. Now that you've been at the helm of one of the premier ones for two years, do you view multilateral institutions skeptically? Do you see more needs for reforms for the Bank going forward, sort of post pandemic?
MR. MALPASS: I'm working to have the World Bank constantly improving itself. We've done a really good job, I think, in moving quickly during the COVID crisis. Also, on strengthening personnel, I think we have a very strong senior management team in place now, so those are progress. I should note for you that from the beginning, from when I first entered the previous administration, the things were there of the importance of transparency, the importance of – we worked and put through the capital increase for the World Bank, the capital increase for IFC, and the IDA appropriations that were done throughout the previous administration.
I'm pleased to see the Biden administration's active support for the World Bank and its mission. And I appreciate your mention of the World Bank as a premier development institution. I should make the point, for example, that we're the biggest financer of global climate initiatives for the developing world. We have committed $100 billion of financing over this Climate Change Action Plan for climate co-benefits and we're very focused on the results from that spending so that they can have their maximum impact.
MR. RAPPEPORT: Just sort of, last one on the Meetings. You've done now several of these virtually. I assume it saves a lot of money by not having people who are traveling all around the world coming to Washington, as well as – there’s climate benefits on that as well for the reduced travel. Do you think that the Meetings need to be in person going forward or should they be virtual going forward?
MR. MALPASS: I think we need to look at ways of making our Meetings as effective as possible, both in terms of impact and in terms of cost. Cost effectiveness is one of the things I've been working on at the World Bank. We have instituted a policy of fiscal discipline throughout the year. We've been on a quarterly basis, setting aside the travel savings - the savings from travel, which are immense. That, I hope, will be used to expand programs in developing countries. And I don't know if you know, but the IBRD, which is the banking part of the World Bank Group, is a big contributor, often cumulatively the biggest contributor to IDA itself. To the extent that the World Bank can be cost effective, that benefits our development policy lending directly, which I find important and satisfying for the Bank.
MR. RAPPEPORT: Does that make the case that we shouldn't have these Meetings in person, if that money could be going to developing countries?
MR. MALPASS: I think we need to look at which meetings can be done in person and which can be done virtually. I do think the world, all over, both in the private sector and in the public sector, will learn a lot from the current experience in terms of the efficiency of virtual meetings. I hope going forward that many more meetings will be virtual. Whether we have Spring Meetings each year as well as our Annual – I think we will continue to have our Annual Meetings, which are in September or October, be physical. But some parts of them, I think, could be done effectively in virtual conferences.
MR. RAPPEPORT: Great. Anything else you want to talk about?
MR. MALPASS: No, these are good topics, Alan. You know if you have question, come back to me, that's fine. I think we're making really good progress in a lot of areas. I want to mention on vaccines–we're doing what looks like one of the world's biggest vaccination campaigns and it's going quickly and successfully. We're doing the debt initiatives that are challenging, as you drew them out. We have major ongoing efforts on climate that I think are well targeted. And there's, I don't know if you've read our – you know, we have a lot of key elements in our new Climate Change Action Plan. And then I do want to mention the importance of World Bank being a big organization in Washington DC, but with more and more of our footprint being in the developing countries themselves, in a way that's really effective for our program delivery.
MR. RAPPEPORT: Great. Well, it is very nice to catch up with you, Mr. Malpass, after all this time. Thank you so much for making the time on an extremely busy week and I hope you in the family doing well,
MR. MALPASS: Thank you, Alan. Look forward to seeing you when we can.
MR. RAPPEPORT: Yeah. Look forward to it as well. Take care.