Thank you Minister Mortensen for your opening remarks and for hosting this meeting. I am very pleased to be here and to meet with you today – the Nordic Baltic constituency is deeply engaged in the World Bank and in development, and we welcome your influential role. It’s also fortuitous that I’m here during the Copenhagen Democracy Summit given the challenges democracy is facing around the world.
Ukraine
I would like to start with the war in Ukraine and the affront to democracy happening there. There are no words to express the unfolding horror. I am deeply shocked by Russia’s invasion, the death, and the atrocities. The war is devastating Ukraine’s economy, infrastructure and living standards. Our preliminary estimates suggest that the economy could contract by as much as 45 percent. Our estimates show that $60 billion in damages to buildings and infrastructure had occurred by the end of March.
Immediately after the invasion, the World Bank Group mobilized an Emergency Financing Package of over $700 million for Ukraine, with the support of grants and guarantees by many of you in this room. This week, our Board approved the Public Expenditures for Administrative Capacity Endurance project, which will support the Ukrainian government to sustain core government functions and provide education services, again supported by guarantees from many of you. Overall, we have been able to put together $7 billion of financing for Ukraine so far, of which $3 billion was mobilized from partners. We have disbursed about $2 billion and are looking to disburse another billion in June.
The ripple effects of the war, in part through the price spikes in food, fertilizer, and energy, are impacting the most vulnerable, particularly in Africa and the Middle East. We published our latest forecasts this week in our Global Economic Prospects report, or GEP. We are seeing the sharpest slowdown in economic activity in 80 years. We expect global economic activity to slow to 2.9 percent in 2022. This forecast is close to one-third lower than our January forecast of 4.1 percent. We also significantly lowered our growth forecast for emerging markets and developing economies.
The energy tradeoffs made in Europe will have major consequences for developing countries. The increased price of liquified natural gas is already causing reduced crop yields and an increased use of coal, diesel, and heavy fuel oil in the developing world. Investments need to be made now to stop this shift into more carbon-intensive fuels.
We were able to respond quickly to the COVID-19 pandemic and are working to provide a rapid increase in support during this latest set of overlapping crises. We will be presenting to our Board in a few weeks a 15-month crisis response envelope of around $170 billion to cover April 2022 through June 2023. I also recently announced that our support for the global response to the food security crisis will be up to $30 billion in existing and new projects. These efforts will increase next season’s production, facilitate increased trade, support vulnerable households by scaling up targeted programs, and make food systems more resilient. As you know, a substantial portion of the WBG’s financing is aimed at global public goods—activities that benefit all countries. These include addressing climate change, food security, refugee flows, and health preparedness.
Your generous IDA20 contributions will be a central part of the World Bank Group response to the compounding crises. The Nordic-Baltic block combined is the third largest donor to IDA20 with a total burden share of 5.89% and a total contribution of more than US$2 billion. We are very grateful for the increased contributions from all the countries in the constituency.
FCV
The Ukraine crisis is a tragic reminder that conflicts around the world have far-reaching impacts. We estimate that 39 countries – or roughly 1 billion people – are experiencing open conflict situations or high levels of institutional and social fragility. The number of conflict countries has doubled over the past decade, with most of them being protracted, particularly in the Middle East and Africa, and the number of refugees and IDPs also increasing significantly. Fragility was already a significant problem before COVID hit, and these countries are now facing food insecurity and increasingly unsustainable debt levels as inflation and interest rates rise.
The World Bank Group is responding, with increased financial support to FCV countries, and with more staff on the ground. Addressing the challenges of fragility, conflict and violence requires strengthened international cooperation and deeper collaboration with governments, with partners such as the UN, with civil society, and the affected populations themselves. It is important to avoid fragmentation. Country platforms are a way to achieve this by engaging a wide group of development actors that work to scale up successful programs. Another major challenge is the delivery of weapons that enter fragile and conflict-affected areas. It must be stopped and the overhang of firearms and landmines left from previous outbreaks of violence must be reduced.
Our FCV Strategy is a strong framework, and we are on track to operationalize the concrete measures in that strategy. We will need to adjust implementation as needed to meet the dynamic challenges facing FCV countries:
First, by improving our ability to adapt to challenging and volatile situations. This requires addressing difficult tradeoffs between short-term humanitarian needs and long-term development gains and adapting our country engagement and operations to fragile environments. Afghanistan, Yemen, and South Sudan come to mind.
Second, by increasing engagement on FCV situations in middle income countries.
Third, by expanding the use of analytics; the Joint Data Center on Forced Displacement, hosted here in Copenhagen, is one source; and
Finally, by promoting the role of the private sector, which I know the Nordic countries focused on recently through the Fragility Seminar.
Climate action
I’d now like to turn to climate change. Firstly, I want to commend the engagements you have organized since COP26, including the Lahti Adaptation Finance Ministerial in April and Stockholm+50 just last week. I was glad Axel von Trotsenburg and Alfonso Garcia Mora could represent the World Bank Group there. We have a strong leadership team in the World Bank Group that is very focused on addressing climate change.
As you know, the World Bank Group is the world’s largest financier of climate action in developing countries – over $26 billion in fiscal year 2021 alone. That number is set to rise further this year. We account for over half of multilateral climate finance to developing countries and over two-thirds of much needed adaptation finance. We are committed to aligning financing flows with the Paris Agreement.
Our Climate Change Action Plan is built on the integration of climate and development by identifying the major climate vulnerabilities and contributors to greenhouse gas emissions; developing impactful projects; and working with the global community to fund them.
Last year, in preparation for COP26 in Glasgow, we published a set of policy notes that laid out priorities for climate action, including diagnostics such as our upcoming Country Climate and Development Reports (CCDRs), country strategies, the energy transition, adaptation and climate finance.
Ahead of COP27, we will be publishing the first batch of our CCDRs and a Chapeau that highlights the key priorities and impactful interventions coming out of these diagnostics. We will also be sharing with our Board the update on the implementation of our Climate Change Action Plan.
Regarding climate finance, we are circulating and discussing our papers. They put forward models to pool funding from the global community and make it available for the most impactful and scalable climate change projects, finance adaptation, and mobilize private capital. They describe several key obstacles and considerations in achieving impact. These papers will be enhanced and available for discussion prior to and during COP27. The kind of investment required for a comprehensive approach to global public goods such as climate change is far beyond the current capacity of governments and international financial institutions, or what guarantees can provide. Existing instruments have a track record of efficiently channeling funds to projects that will reduce GHG emissions, but need significantly more funding from the global community.
Conclusion
Since last year, the World Bank Group has continued to work with partners to address the impacts of the COVID-19 pandemic. Our global response has reached over 100 countries with emergency operations to prevent, detect, and respond to COVID-19 and strengthen systems for public health preparedness. Unfortunately, too many people around the world did not have access to a COVID-19 vaccine. By the end of this fiscal year, the World Bank will have provided nearly $11 billion in vaccine financing benefiting 80 countries. We have delivered nearly 400 million doses to 50 countries and have over half a billion doses under contract.
There was a huge amount of inequality in the world prior to COVID. I worry that each step in the progression of crises in recent years is leaving poorer countries further behind, adding to inequality. COVID-19 hit hard. School closure effects may be felt for decades and worsen inequality, particularly for girls. During the pandemic, most of the impact of accommodative fiscal and monetary policies benefitted advanced economies -- increasing amounts of global capital and fiscal stimulus were allocated to a narrow group. The impact of inflation has hit the poor the hardest. The anti-inflationary policies getting underway now risk deepening the inequality problem. Stagflation could worsen, exacerbated by shortages of the working capital needed for small businesses and supply chains. We need to combat inflation through enhancing growth, increasing global supplies, and assuring currency stability.
We will need concerted global efforts to confront the multiple crises in front of us. I welcome your views and reflections and look forward to the rest of today’s conversation. Thank you.
