DAVID THEIS: Good morning. Great to see you all in person; first time in a couple of years. So, glad to get started.
I'm David Theis, the World Bank's Press Secretary, and thank you for joining the 2022 Annual Meetings Press Conference with World Bank Group President, David Malpass. Mr. Malpass will give opening remarks and then we will turn to questions.
And because Mr. Malpass values transparency, I should also add that if you're interested in following his remarks, comments on global policy, readouts from country meetings, you should follow him on Twitter @DavidMalpassWBG.
Thanks to those who've sent questions in advance online. I will try to get to those as well as everyone in the room. And if I can ask, please keep to one question per outlet, and identify yourself and your outlet before asking your question. Thanks very much. Hope everyone is keeping well.
Mr. Malpass.
DAVID MALPASS: Thanks, David. Good morning, everybody.
The global environment, as you know, is very challenging. In fact, it's grim for developing countries. I think there's a crisis facing development. We've put out our poverty numbers last week, showing 70 million more people in extreme poverty and median income going down by four-tenths of a percent. That's the first decline in the records that the World Bank's been keeping since 1990. The growth rate – we've lowered our 2023 growth forecast from 3 percent to 1.9 percent for global growth. That's dangerously close to a world recession, and a world recession could happen under certain circumstances.
All of the problems that people have taken note of, the inflation problem, the interest rate rises, and the cutoff of capital flows to developing world hits the poor hard. That's a huge challenge for the World Bank. We are focused on helping people get ahead in developing countries, and right now there have been reversals.
The countries, of course, are all different. We'll have a discussion today of certain countries. It's not monolithic at all. Some countries have already been raising their interest rates and may be reaching a point where they don't have to keep raising. Some countries have done one kind of subsidy versus another kind of subsidy. Fiscal policies are different throughout. Also very importantly, some countries are commodity producers and some are commodity buyers. We've in general, advocated for countries that --as they address the crisis -- they try to have targeted responses. That means support for the poor; that means interventions that are targeted; and also that there's an exit strategy, that they are temporary.
I wanted to mention several things going on and I won't elaborate and then we can do it in questions.
One is the buildup of debt for developing countries, and I went through why that is: interest rates up; the amount of debt itself is up; and their currencies tend to be weakening. The depreciation of the currency adds to the burden of the debt. We have a fifth wave of debt crisis facing the developing world.
Second, there's been a lot of discussion on Ukraine. The World Bank is in the middle. It's the primary conduit for the transfer of funds to the administrative side of the Ukrainian Government, and we had good conversations yesterday on that. We've set up yet another trust fund so that we can absorb money from various parts of the world, donor community.
Very important what's going on in education. As you know, learning poverty is up. World Bank has kept extensive data on the reversals going on in education. We had an important event to discuss the principles of getting out of that crisis.
On climate, we've had extensive interaction. As you may know, the World Bank is the biggest funder of climate action. We are proposing at these meetings a new trust fund called SCALE that would allow the world--the global community to put funding into global public goods. That's the connection that needs to be set up within the global system to actually have impact on greenhouse gas emission reduction. We're putting out the CCDRs, the Country Climate and Development Reports, at a rapid clip. China's came out yesterday; Vietnam's, earlier in September; and a host of others. We've done 10 countries and there will be another 20 by the time of COP27, which we're building up for. We were very pleased to have a major contribution from the U.S. on the Clean Technology Fund, which is one of the climate trust funds.
That's it on my list. To summarize, the world is facing very challenging environment from the advanced economies, and that has serious implications, dangers, for the developing countries. My deep concern is that these conditions and trends might persist into 2023 and 2024.
Thanks.
MR. THEIS: Thank you. I'm going to go with the woman in the gray jacket here in the middle, please. No, behind--sorry, thank you. You, yeah, thank you.
QUESTION: Thank you for taking my question. It's Maoling Xiong with Xinhua News Agency. I want to ask about a possibility for a global recession, the World Bank publishing a recent study that the central banks are simultaneously hiking interest rates in response to inflation, and the global economy is heading toward--might slip into a recession in 2023. And if that happens, what does it mean for low-income economies, especially, and how should we better react? Thank you.
MR. MALPASS: Thank you. The slowdown itself of the world economy really hits developing countries hard and especially the poor in developing countries. It's a negative impact. As far as the numbers, I've mentioned we've lowered our world GDP number for 2023 to 1.9 percent; that's a positive number. That's down 1.1 percent from where it was in June. But there's the risk of it going lower. World population growth we estimate at 1.1 percent per year. If you get much slower in terms of world growth, that means people are going backward. And we already have--and I'll re-emphasize--you know, the World Bank has a mission of having shared prosperity, and that means in the broad sense, people's wellbeing going up. And the data from the poverty report shows median income going down for the first time. If we have a world recession now, that would also depress median income, meaning people in the lower half of the income scale are going down.
One more point is I've been concerned about the concentration of capital in the world into the top end of the advanced economies. That's, I think, one of the issues that the world has to deal with, to allow capital to flow to new businesses and to developing countries. That would take a change in the direction of fiscal and monetary policies in the advanced economies. Thanks.
MR. THEIS: Thank you. I'm going to go to the front row, here. The gentleman in the red tie, please.
QUESTION: Yes, thank you for taking my question. My name is Simon Ateba with Today News Africa in Washington, D.C. Exactly to the point that you just made, the fact that we have hundreds of billions of dollars available for investment, but that money doesn't seem to flow to low-income countries, especially in Africa. I would like to talk a little bit more about the situation in Sub-Saharan Africa. Some of the policy recommendations and some of the steps that the World Bank has taken to address some of the issues, they include the food crisis, energy prices, and the rest. Thank you.
MR MALPASS: Yeah, thanks. Let me give you some basics. In our Fiscal Year 2022, which ended on June 30th, nearly half of World Bank commitments were made to Africa. That's a change that's been happening over the years, a gradual shift in the World Bank commitments toward fragile countries and in particular toward Africa. We've been expanding those programs as much as we can.
To your capital flow point, let me add one thought. When interest rates were being kept low by the world, there was a reach for yield. Investors were putting money into some of the emerging markets. But when you look at the data, it wasn't going into gross fixed capital formation. It was going often into government bonds in those countries. If you think about the flow, it went from savers in the advanced economies to governments in the developing countries and didn't actually create infrastructure and the new businesses that are needed to increase production.
One of the things we're advocating now is just that the countries in the developing world, and in particular in Africa looked to use this challenge, this crisis going on to improve their structural policies so that they can produce more in their countries. I think to get there, there would have to be more gross fixed capital formation. That means the actual, physical investments and educational investments within the countries in order to have future growth.
One other point is the debt crisis and maybe we can talk about that with another question, but that overhangs Africa – and I said in my opening why. You know, the interest rates are up, the burden of the debt is higher, and the currencies are weakening for quite a few of the countries. The world doesn't have a technique now to provide debt relief even when debt is unsustainable. We've seen multiple countries trying to--asking the world community for debt relief and not finding a mechanism to do that. That's particularly relevant to Africa.
MR. THEIS: Great. All right, I'm going to stick with--looks like the front row. This gentleman here, please, thank you. And then, I'm going to turn to an online question.
QUESTION: Good morning. I would like to ask in Arabic, please--in Arabic language.
MR. THEIS: In Arabic?
QUESTION: Yeah.
MR. THEIS: Give us a second.
QUESTION: [Through interpretation] I am Ahmed Imad, Al-Masder Newspaper in Egypt. My question is about Egypt and the World Bank recently gave $500 million to Egypt. We want to know more details about this $500 million and is there any more provision in the near future. And what is your view for the Egyptian economy, in general? Thank you very much.
MR. MALPASS: Yeah, thank you. I don't know if everyone could hear it. It was a question about Egypt and the World Bank did a loan in--I think it was in June. It was in our fiscal fourth quarter for Egypt.
As the food crisis hit, with Russia's invasion of Ukraine, it drove up food prices worldwide. Some countries-- there was a differential impact on various countries based on how dependent they were on food from the Black Sea. Egypt was hit hard; several countries were. The World Bank moved very fast in April and May to provide assistance. We did a Lebanon loan. We did the Egypt loan that was mentioned here, which included two things: It was to help purchase wheat because there was a shortage and bread is very important in Egypt; but then, it also went to improvements in the food system within Egypt and the government put forward some reforms that could help within future resilience for food crisis. We also did loans in Tunisia and also in East Africa. There was a [$2.3 billion] loan for food security support in East Africa.
This is part of our overarching food security program that I announced in Berlin. It's $31 billion that we will commit to food security over the 15 months starting in April. We're well along on that. I think we've done maybe 9 billion of that.
Now, the second part of the question was what could Egypt do. Egypt's facing the challenges that many developing countries are. I'll emphasize to the extent that there are subsidies within the economy, that they be targeted and that there be an exit strategy from the subsidies. To the extent that there can be efficiency gains for state-owned enterprises, that those be done as quickly as possible. We stand ready to support Egypt's reform program as it emerges. As the reforms are put forward, we can consider loans in various areas. The World Bank is moving very quickly to respond to the situation in the world, but there are steps that are needed in order to get loans that can be taken to our Board or--and I should emphasize to people, you know, the World Bank puts out a huge amount of our commitments in the form of grants.
Loans and grants go to the Board, but they have to--they need to have a quality that can improve the situation going forward, and we stand ready on that with Egypt. This involves the fiscal policies, the state-owned enterprise policies, the efficiency of government spending, the housing policies. We work in all areas of that and look for opportunities to lend to Egypt in this situation.
MR. THEIS: Great. Turning to an online question real quick, from Mrs. Baasansuren, from The Daily News, the largest daily in Mongolia. "What are the key risks to the global economic outlook in the near term and how will they impact small economies like Mongolia?"
MR. MALPASS: Yeah, well, Mongolia is a sizable country.
MR. THEIS: Her words, not mine.
MR. MALPASS: Small countries are sometimes more price takers, or they're buffeted by the global situation. Oftentimes they're also hit hard by climate, and that's especially true of small island states, where we work ambitiously and broadly with small island states.
In the case of Mongolia, of course, they are hit hard by the debt burden, by the rising interest rates. They have been borrowing heavily from China, which is its own set of challenges in terms of that. And what the--I think best for smaller countries would be if world growth were increased. And a key part of that is that there be--that inflation, the inflation problem, and we saw it in this morning's U.S. numbers--that the inflation problem be addressed as quickly as possible and including with more production.
Even for Mongolia, the best thing that--or one supportive thing that the world could do is to have more production out of the United States, out of Canada, out of China, out of the big economies, because that addresses the inflation problem and that would help get growth back on track.
MR. THEIS: Great, thank you. The gentleman here in the blue shirt with the hand up. Thank you.
MR. MALPASS: There's many blue shirts over there.
MR. THEIS: You're right. Go ahead.
QUESTION: Chris Cermak with Monocle Magazine and Radio. I wanted to ask you a little more about Ukraine. You mentioned the trust fund that has been set up. There was this ministerial yesterday. President Zelensky, one of the points that he asked for was insurance to also help not only public funds but private funds, private investment get into Ukraine. Is that something you could comment on? How can the World Bank help to ensure public and private investment gets into Ukraine during this time?
MR. MALPASS: Yeah, this is an important problem; it's a complicated problem. The insurance takes many forms. Some insurances for freight shipments going and can they be insured in a conflict zone. I'll just speak for the World Bank: we have various insurance products. One is from MIGA, the Multilateral Investment Guarantee Agency: they're active in Ukraine with some insurance on political risk and on events that can occur for Ukraine. And then, the World Bank itself, we are using donor guarantees right now, which is a form of insurance. Just by the end of this month, we'll disburse another 500 million. We've disbursed so far $11 billion to Ukrainian Government, and there will be another 500 million--530 million--by the end of this month that is enabled by a guarantee from the UK Government and also by assistance from Denmark. Many countries are participating in the channeling of resources to Ukraine.
I don't want to neglect the International Finance Corporation, which I'm President of and is part of the World Bank Group: it is active in Ukraine with the private sector, and some of that involves either insurance or things that operate as giving confidence to the market participants that are in Ukraine. That also is an active program. Thanks.
MR. THEIS: End of the row here, please. Thank you.
QUESTION: Thank you. My name is Nume Ekeghe from Thisday Newspaper, Nigeria. The general consensus is that most SSA countries are at risk of debt or presently at debt distress. If I can narrow it down to Nigeria, where do we stand in our debt stance, firstly?
And then, also, the Nigerian authorities asking for debt restructuring. Is that something that will be considered by the World Bank?
if I can also add on subsidies, energy subsidies in Nigeria. The plan is to take it out next year. Would it be too little, too late or would you still further reiterate that it's taken out as soon as possible? Thank you.
MR. MALPASS: Thank you. And I'll do it a little bit in reverse order. With regard to subsidies, to the extent that governments can have them be smaller, meaning if you're putting a cap on gasoline prices, don't make it a nominal cap in the local currency terms, but allow it to be reduced over time. The challenge for Nigeria is the subsidies are so large that they undermine the revenues coming to the government from the state-owned oil company. Nigeria is actually in a concerning situation because the increase in the oil prices that occurred earlier this year actually ended up hurting the finances of Nigeria because of that large subsidy that's provided.
With regard to the debt restructuring, the World Bank works very closely with the IMF on debt situations. Nigeria has not asked for the common framework under the G20 process. That process has been slow acting in Chad, in Ethiopia, and Zambia. There's some signs of movement on Zambia but still challenging. Nigeria nor--and Ghana both--did not ask for common framework treatment. [IMF Managing Director] Kristalina [Georgieva] and I were talking yesterday with the group about it. If countries could have a situation where the common framework caused or allowed the country to have a standstill on their debt, that would help the countries choose their path forward on debt restructuring. That would mean they would get a break on debt payments while they're working out a restructuring agreement with the world.
But Nigeria didn't go--hasn't gone that route. Some of the challenges on Nigeria--I've been involved with them for some time--is the dual exchange rate or the multiple exchange rates that are used. That makes it very hard to have capital flowing in an efficient way within the country. The trade policies tend to be protective on the import side and restrictive on the export side. We would work with the IMF on an assessment of the debt sustainability of Nigeria, but then it would also be up to Nigeria itself to interact with the various creditors, which include bond holders; it includes official creditors that are engaged in Nigeria. Thanks.
MR. THEIS: In the middle, third row with the hand. Yes, stand up, David. Thanks.
QUESTION: Hi, David Lawder with Reuters. I just wanted to go back to my colleague's question here about Ukraine. Obviously, there's a lot of concern here about Ukraine and a lot of pledges to keep up the flow of funds to keep them afloat so they can battle this invasion.
I'm wondering, though, we're also hearing from some other Regions of the world that they see this money flowing all to Ukraine, you know, this European country; yet, they sort of feel maybe that they're a bit left out, that they feel like, you know, countries in Africa, countries in Latin America and Middle East that are really struggling, I'm just wondering if you can talk about, you know, this phenomenon and are we sort of going a bit too far in that direction, or do you feel that all these problems are because of the war and the war needs to be ended first before you get to a lot of these other problems. Thank you.
MR. MALPASS: Thanks. Good question. The answer is: some of both. Clearly, the war itself and Russia's invasion are causing massive problems for the world. It is appropriate for the world to address that and address that in a unified fashion, and that's what I was sensing yesterday, and the World Bank's very involved in that.
Your question is exactly right that others are affected by that. Are they being left out? I think we, the World Bank Group, are trying to be cognizant and be expanding in all parts of the world given the spillover of the crisis. For example: I went to Romania and Poland early on in, maybe in April, because they were affected by the refugees coming out of Ukraine. I went to Morocco and Senegal which were being hit hard by the energy price increase, the lack of natural gas shipments, that affect the fertilizer flow within Africa.
The World Bank has programs on food security. We had an important event yesterday that included fertilizer. One of the biggest African fertilizer producers was here and we had a discussion of how can there be more fertilizer appropriate to the crops available in Africa, and there were specific conversations I met with the President of Togo, yesterday. Togo has discovered phosphate and that's a key ingredient within fertilizer, and there's availability of natural gas from Nigeria or from Ghana that could be then used to make fertilizer, if that were a direction for the world.
We are working throughout the developing world on the debt problems; on the private sector engagement problems that are so important for each of the countries. I guess I'll push back a little -- then yesterday, I met with the G7--had a meeting with the Compact with Africa countries which is a group that Germany has been very involved in, but these are important countries within Africa and what can be done to help there. There's 12 in that group.
I'll be meeting today with--or some time--today or tomorrow with the African--the group of African Governors that are here. There's a major focus. In fact, I would say, to be clear, David, there's one event that--there was an event yesterday on Ukraine. But if we look throughout the week, we've got seven active days of meetings of the World Bank/IMF, and those other meetings are constant and will be on other parts of the world. Thanks.
MR. THEIS: Okay. Front row in the middle, there. Hi. Wait for the mic, thanks.
QUESTION: Lee Harris with The American Prospect. Secretary Yellen signaled some potential expansion of bank lending capacity which she suggested could scale up lending in the tens of billions of dollars. I wonder, how prepared you to increase risk appetite, including by relaxing the commitment--the sort of perhaps excessive commitment to AAA ratings and specifically holding SDRs to expand lending, among other capital adequacy changes? How much additional lending do you think these measures could unlock?
And can you respond to reporting by Reuters that the Bank tried to suppress the G20 review on capital adequacy frameworks? Thank you.
MR. MALPASS: Let me take that point first. We work actively with the G20. The G20 has constant meetings all the time. The idea of suppressing a report isn't correct at all. The World Bank participated actively with--it's called the IFA working group--that's the International Finance Architecture working group of the G20, which is a permanent working group that had many meetings on these topics and the World Bank participated fully and led--there was unity among the multilateral development banks on the ways to respond within that capital adequacy framework discussion.
We have already engaged with our Board on discussions of the findings and the outcomes of that capital adequacy, that CAF report. That was discussed yesterday. We embraced the concept of how do you get more resources. We understand how vital it is for people in the developing world. I've gone through--we've been talking about the cutoff of resources that's coming from capital flows, from the markets being closed to various countries. And this--the big challenge--I call it a crisis in development. One of the solutions is more resources, including more resources through the World Bank.
We'll be talking with shareholders about the ways to do that. That gets into the callable capital of the World Bank and other multilateral development banks; how can it be best utilized? The World Bank leverages more than the other multilateral development banks. To give you one statistic, since its inception, the paid-in capital, the amount of cash paid into the IBRD, the Bank portion of the World Bank, is $20 billion and the commitments that have been made from that are $820 billion. Now, that's the combination that's made possible by the callable capital principally of the United States. It's also made possible by the earnings of the Bank. As the Bank earned over years, it was put into retained earnings and that allowed more lending to be taken over time. We're looking at all the techniques to expand the resources, and we actually welcome that discussion that's ongoing.
As far as SDRs, we've engaged with the IMF from the beginning on SDRs with looking for solutions to the technical issues that block the use of SDRs on the balance sheet. Thanks.
MR. THEIS: Thank you. We've got time for one more. I'm sorry we got a late start. I'm going to call on Press Trust of India for the last question, please.
QUESTION: Thank you. Thank you for doing this. I would like to ask you about your assessment of India's economic situation, and how some of the flagship programs like digitization and direct cash transfer has been helpful in poverty alleviation, and the role for that. Thank you.
MR. MALPASS: Thank you. Notable in our recent poverty report was that some countries had been able to soften the blow on poverty that was caused by COVID through cash transfer systems and digitalization. I think we should recognize the importance of digitalization within the world because it allows even poor countries to have a connection with people around the country. It's a connection that wasn't available before this digitalization. India is taking good advantage of that to create social protection programs that reach the poor, and that showed up in the data from 2020 that, as COVID hit, there were programs that helped soften the blow on the poor. We welcome that.
I think India can do lots more on the administrative side to create efficiencies, both within the federal government and the civil service of India and within the various state-levels--and the World Bank works actively with both, with the federal government but also actively with the state governments on ways to address poverty, ways to address stunting, ways to address water and electricity, and also climate adaptation. All of these are core issues of our program in India.
MR. THEIS: Take on more? Great, okay. Going to go, I think, over here. Please, thank you. Yes, you, go ahead.
QUESTION: Hi there, Alexa Angelus with Fox Business. Europe has pivoted and started investing in fossil fuel infrastructure. Do you feel this will ease the energy instability in the Region quickly enough or does Europe need more help from the U.S. with increased production, here?
MR. MALPASS: Notable within the global context is the importance of energy in it as Europe was dependent on Russia for not just natural gas but also for oil and for coal, it creates a major challenge for Europe in terms of their economic slowdown and in terms of how do they replace that energy?
There's a new pipeline from Norway to Poland which is bringing fresh supplies. There's active talk by Europe of ways to bring in more LNG, liquified natural gas; and as you mentioned, there is talk in Europe of more production in Europe itself. I think as we look at it, the general point I'd like to make is just faced with inflation and high energy prices--and the world needs to think in terms of cleaner fuels and transition fuels in order to help move the world forward -- less carbon-intensive fuels as the solution and the direction for the world.
Thanks. Thank you, everybody.
