2023 Spring Meetings Opening Press Conference
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2023 Spring Meetings Opening Press Conference
World Bank Group President David Malpass will address the press during the World Bank Group and International Monetary Fund 2023 Spring Meetings. He will provide updates on the Bank Group’s efforts to rapidly scale up support to help countries deal with the overlapping crises of the COVID-19 pandemic, the Russian invasion of Ukraine, food insecurity, and worsening climate impacts. He will also share his views on what the global community needs to do to respond to global development challenges now and over the long term.
00:45 Opening remarks by WBG President David Malpass
06:51 China in the global economy landscape
08:43 Debt relief and restructuring for low-income countries
13:05 Egypt: Debt, private sector support, challenges
16:50 Growth projections for Latin America and Brazil
20:08 Nigeria: Economy, debt, subsidies
25:31 Debt and burden sharing / Turmoil in the banking sector
32:50 Climate change and debt
36:53 The humanitarian crisis in Afghanistan
40:24 Energy transition in Morocco
Good morning. Great to see all of you at this rather early hour. Thanks. I'm David Theis, the World Bank's Press Secretary, and thank you for joining this 2023 Spring Meetings press conference with World Bank Group President, David Malpass. Mr. Malpass will give opening remarks and then we will turn to your questions.
Thank you, David. Good morning at this early hour. The meetings have been going well this week. There have been a lot of engagements. It's in the context of a global economy that's slowing in 2023. This owes to the persistence of inflation; oil prices are high; credit disruptions have occurred; and the world is in this long period of normalizing interest rates after a long period of artificially low interest rates. It's going to take time for asset prices to adjust and also for capital flows to move to more productive uses. The best way out of this for the world would be to have policies that generate more growth, more production, better living standards for people. And of course, that's what the World Bank goal is for developing countries.
We need to break out of this cycle where the capital of the world is absorbed just in paying national debts and just in repaying people who already have money, and it needs to move into productive uses for new investment. Our reports show that investment levels in developing countries are not adequate to increasing their growth and, in many cases, are not even keeping up with the capital depletion that is going on in those countries.
All of this is magnified against the poor. And that, again, is the mission of the World Bank, to see poverty alleviation, to see shared prosperity, and to see living standards go up in a sustainable way. That was the outcome of our discussions with our Board on the evolution of the World Bank. We've embraced a longstanding effort now, many months in the making. And I won't go into all of the details for you, but I'll mention that there was clarity from the Board on reaffirming the goals of alleviating poverty, that being a primary goal; and of boosting shared prosperity. And that's at the core of the work, and then it's done in the context--progress towards those goals requires a stronger focus on sustainability, resilience, and inclusiveness. Those are now being implemented through the operations policies of the Bank.
Also, through this evolution process, we stated our commitment to enhance our operational model to strengthen our service to all clients. This involves middle-income countries as well as low-income countries. And there was also a convergence on ways to boost the financial capacity of IBRD, the International Bank for Reconstruction and Development, by lowering the Equity to Loan ratio to 19 percent. There's a hybrid capital pilot for capital market investors. And there's a scaled-up bilateral guarantee program. All of these combined can give as much as $50 billion of new financing by IBRD over the next 10 years.
I do want to mention yesterday was a busy day here at the World Bank/IMF Spring Meetings. I participated in, and often cochaired meetings, on the MDB evolution, on the global roundtable on debt, where we looked seriously at ways to reduce debt, and I'll mention--let me mention several things that came out of that.
One is the importance of timeliness in the process, investors really need some kind of confidence in how the process will proceed. There needs to be early information sharing, and IMF and World Bank will be sharing the debt sustainability analysis earlier in the process, and we're working on a note for the rules on that. There was a call for disclosure of contracts. Transparency is very important within this process. Also, discussion and agreement that there needed to be equal burden-sharing among creditors as part of the restructuring process. And there will be a workshop on that, that will start in May, to discuss the techniques of that.
Also, yesterday, in addition to debt and debt and MDBs, there was the Ukraine discussions, as the war there continues. There was the G20 meetings that went into the evening last night, G7 meetings. And also, very importantly, the Development Committee of the World Bank, that's our Governors, and there was strong endorsement of World Bank leadership and of the evolution process that's underway for the World Bank.
So, as we think big picture about what's going on, it's this slower world growth where the problems are magnified into developing countries. The World Bank is working on all of these problems but the reality of the world is there's not enough resources and the problems are actually growing. As we think about the World Bank into the future, working harder, more efficiently, better, and stronger on the impactful projects around the world is all part of the goal of Management. Thank you.
You have recently warned of global economic slowdown this year, with China and India notable exceptions. So, would you please elaborate more on the momentum of the Chinese economy and what an improved Chinese outlook mean to the world--fragile and global economic landscape. Thank you.
Thank you. I was in China in December as the lockdown was lifted. And so, what we're seeing in China is a rebound from lockdown. That means 2023 growth may reach 5.1 percent after a 3-percent kind of growth in 2022. And so, that's a pickup. It adds to global growth and it also reflects China's efforts, explicit efforts, to have a faster opening process for China and to have the supply chains begin to come back together as they feed into global supplies.
I think this is also in the context of the global supply chains readjusting after the considerations over the COVID years. There had grown to be a strong dependence on China, and so the world is working to diversify supply chains, as well. In that context, China's growth is additive in a year like 2023 where that's needed. But it also leaves open the challenge for the world of how do you get the most efficient production in a diversified way going around the world. Thank you.
Good morning. I just wanted to ask regarding the debt roundtable that took place yesterday. How much progress was really made, and where is the situation relative to where you want it to be at this point in time on debt relief and restructuring for low-income countries?
Thanks. Restructurings mean you actually get to a change in the debt contract so that there's more sustainability for the country. That can be done by changing the interest rate on a loan or by extending the maturity. It can be done by lowering the principal amount of the loan. Those are the ultimate goals for the countries.
The Common Framework, the G20's Common Framework process, sought to get that started, but we've looked--we, World Bank, and IMF-- have looked for ways to improve the G20 process so that it would be more timely, actually move the process along, and actually reach a result in terms of debt sustainability for the countries. There's still a lot of work to be done and the details matter.
We're talking about Zambia, who has been present at the meetings, and … they've been working for two years with the world community in order to restructure their debts. It's in the context of a very successful economic program in Zambia. They've done more than most any other country in terms of having fiscal discipline, having growth-oriented policies that make it possible to strengthen the economy. But they still haven't been offered the text of a debt restructuring that would reduce the debt burden. We're hoping that there will be a memorandum of understanding, an MOU, which is the goal of this process, that could come out this week or next week. China would need to go along with it, and that's an important part of this.
The private sector creditors are critical and have to be deeply engaged. We discussed yesterday, the World Bank is providing implicit debt relief through the IDA process. You know, IDA is the fund for the poorer countries, and it constantly is giving substantial relief often through outright grants. For example, in Zambia, we will be starting on July 1 all of our assistance to Zambia will be in grants. Then it's incumbent on the other creditors, and particularly on China, to come forward with actual debt relief that will allow the country to become sustainable.
I can go through each country, by it's specifics. In Ghana, we are looking for the creditors committee to form; in Ethiopia, for there to be structural reforms that can get to the IMF program. And that leads directly into the exchange rate system. They're using a dual exchange rate system in which funding of the official exchange rate for a narrow group of people is very expensive. And so, to move away from that so that there can be stronger growth within Ethiopia. My view is if they improve the exchange rate system, capital would come back to Ethiopia. Right now, the exporters keep their funds outside Ethiopia. If they unified the exchange rate, which is under discussion within their economic program, then there would be a flood of investment back to Ethiopia, and that would improve substantially a desperate situation that's going on in East Africa. East Africa is facing famine; it's facing very, very hard climactic conditions; and this shortage of fertilizer that's going on around the world because of the high price of and lack of availability of natural gas.
So, these are all challenges within the debt framework. Thanks.
My name is Doaa Abdel-Moneim of Ahram Online from Egypt. I have two questions that will be focused on Egypt.
My first one is, the World Bank expected Egypt's debt to jump significantly in 2023 and beyond. How do you see that and what are the key drivers behind this forecast?
My second question is, how do you see the recent developments in Egypt in terms of private sector support-related procedures and, in first place, how World Bank is supporting Egypt on these ongoing challenging times. Thank you.
Thank you. I was just looking up our forecast for Egypt. In 2022, it shows 6.6 percent real growth, and we're looking for 4 percent in 2023. But I should note on that, in countries with currency devaluations occurring and inflation high, it's hard to really track real growth, because as inflation goes up the burden is on the poor because they can't keep up with the rising prices. It creates very real challenges.
We've worked closely with Egypt over the years and the IMF has in developing a program that would be more robust in terms of the private sector. We've encouraged a level playing field between the state-owned industries and the private sector that would then allow more investment to occur and also innovative investment to occur. More strengthened agriculture would help. As we look at the rising debt burden, that's in part because the nominal GDP has gone down after the devaluations. As you calculate--and this is a general problem for countries where, if they have their debt denominated in dollars and their currencies weakened, it makes the debt burden and the debt service burden even more costly for the people of the country.
That's an argument for countries--and I made this argument in my positioning speech in Niger two weeks ago--it's very important for countries to have a macro framework--that means fiscal and monetary and currency policies that all work to create stability. And if I could leave that message for people as we look at the challenges for the world right now, we have the advanced economies slowing down and not sharing very much in terms of capital with the developing countries. It's going to be very important, urgent, in fact, for the developing countries to adjust their economies to make the best out of the limited resources available from the world. And that goes straight into fiscal discipline, separation of monetary policy so that the central banks are not having to monetize the fiscal deficit. A focus on having policies that allow currency stability so that inflation can be held down. And then, of course, the standard things of trade liberalization and private sector enabling.
That means regulatory policies that can help the private sectors of the countries actually grow strongly. So, for Egypt, we hope for strength into the future, I think, and the World Bank stands ready to provide support. But it will be very important to have these improvements in the business climate so that growth can strengthen into the future. Thank you.
Can you talk about the low projections for not only Latin America but also for Brazil's growth this year. And also, I'd like to hear your expectations and concerns for Brazil's economy under the new government.
Thank you. I'm going to see if I--so, I'll tell everyone, we've got 2.9 percent real growth was 2022 and slowing to 0.8 percent in 2023. And so, people should note, Brazil had raised interest rates earlier than other countries. Recall the debate in 2021 and 2022 of whether inflation was going to be transitory, and the major central banks held off on their rate increases. But Brazil was seeing the risk and was raising interest rates then.
And so, what that meant was you're seeing now the delayed reaction to rate hikes, and also to the election uncertainties that came out. As we look at Brazil, it's got huge potential, clearly. That's a common phrase for Brazil. And part of that is agriculture, the logistics chain, the supply chains that can come from Brazil.
One of the opportunities in the world for Brazil is as an agricultural producer. It imports huge amounts of fertilizer from Africa, makes food in an efficient way, and exports to the world in that regard. But the slowdown also indicates concerns that the investors have. This is a global challenge, … the investment flows into developing countries have, by and large, reversed into outflows.
For Brazil, it's an urgent time to have good economic policies so that there can be faster growth, and that would allow the spending that the government is trying to do for social purposes and for environmental purposes, for climate change purposes. So, vital to have a strong focus on faster growth into the future, and I think the good news is the interest rates had already gone up so that's not such a pressing issue. The more pressing issue is fiscal discipline and the efficiency of the regulatory policy to support growth.
Thank you, Mr. Malpass. I guess this is your last annual--Spring Meetings, before Mr. Banga takes over. I was wondering if you could briefly talk about, do you consider your tenure successful? Do you have any regret?
And now, on Nigeria, you know, Bola Ahmed Tinubu has just won the Nigerian presidential election so they are going to have a new government. Can you talk a little bit about the economy of Nigeria? Do you have any recommendation when it comes to subsidies, debt, and the rest, and the situation in Sub-Saharan Africa. Thank you.
For Nigeria, the growth was 3.3 percent in 2022, and 2.8 percent in 2023 within our forecast. And a high priority for the World Bank is shared prosperity in a sustainable way. As we think about Nigeria, there are many changes that are needed in order to allow that process to proceed. While Nigeria has GDP, gross domestic production, a big chunk of that is oil. And that means a lot of people in Nigeria are facing poverty and there needs to be a direct focus on that and they also face insecurity across the northern and western regions that are very challenging. The World Bank is working hard within Nigeria but also working to try to have an economic system that can be more productive. That means Nigeria has trade protection that blocks the market development. They have a dual exchange rate that is very expensive for the people of Nigeria to maintain that dual exchange rate system. They have high inflation and not enough diversification of the economy to really make sufficient progress.
Your opening question was, what are some of the successes, achievements. The World Bank went through multiple crises, as did countries. The COVID crisis was a shock. It was hard on World Bank staff but, more importantly, it was very hard on clients. We worked to move very quickly in order to provide assistance through that period and we achieved a $150 billion surge. This is way above normal levels and size levels of the Bank. And then, as the latest crisis struck in terms of Russia's invasion of Ukraine and the resulting effects on fertilizer, food shortages, and energy shortages around the world. We put a second surge of financing.
People at the World Bank were working 24/7 in order to have loan operations and grant operations and new investment operations running for people around the world. I think it was a success and I'm proud of the results within the World Bank. But I wanted to give you the context for Nigeria, for Egypt, and for other countries where the true success of the World Bank would be if there can be countries where the people are doing well into the future.
And that, I think, is going to take substantial change in the world. That gets to the regret point that you were asking about. I guess my hope would be that we can break on through this debt roundtable and the debt overhang that's weighing on countries. And also, break through on the structural blockages in so many of the big developing countries where, rather than converging, rather than having their growth go up faster than the advanced economies, which would be the goal. As China showed over the decades, a developing country can grow at a 10-percent rate and catch up with the advanced economies in a period of years and decades.
India's showing that now, with roughly 6 percent growth, but with the aspiration of 8 percent per year growth based on policies that will generate faster growth, more electricity access, clean water access, more investment in agriculture, the things that are needed by the countries. I hope into the future the world can really work on those techniques in order to create faster growth and better living standards for people in developing countries.
Thank you for doing this. I want to follow up quickly on the debt roundtable question, but then I have another question, too. So, on the debt roundtable, you've said that there was discussion about burden sharing.
China, until--you know, has been insisting that the multilateral development banks also take a haircut and participate. Have they backed off of that during these discussions to some extent? I understand that there was recognition that--you know, that there are other ways for the MDBs to participate. Can you elaborate on that and then just talk about that discussion, and then what exactly will happen in the workshop.
And then, separately, I wanted to ask you, we've just gone through a period of extreme turmoil in the banking sector. And you know, it does seem like things have calmed down, but I wanted to get your take on it as someone who was formerly in the banking sector and has a little bit of a window onto sort of the historical period, whether you think this crisis--whether a crisis has been averted. Thanks.
The debt process has been one of being more inclusive, of bringing in the debtor countries and also the creditor countries. Over the decades, the process had not brought in the important players, the private sector. I was very happy at the roundtable yesterday that we had the private sector; we had China and other non-Paris Club creditors present; and also, several debtor countries.
This is a new kind of a forum where people that owe and are owed the money are actually talking with one another, with the IMF and World Bank there to try to help get to an endpoint.
China had been asking questions over the years of, shouldn’t there be debt reduction by the MDBs. That actually doesn't make sense because the MDBs are providing--and the World Bank in particular--highly concessional resources into countries. That means there is already an implicit debt reduction going on as the World Bank comes into a situation. The World Bank is providing grants and very long-term, very low interest rate loans for countries. From a net present value standpoint, that is debt reduction on an ongoing basis. I think China was more receptive to understanding that. That can be further discussed, but my sense from the current context is we're moving on to new steps. In that way, that was progress on equal burden sharing.
The workshop will be with the IMF and the World Bank working with the various participants to understand the net present value terms--that means the time value of money. As I mentioned, you can lower interest rates or you can lengthen the maturity, or you can reduce the principal value of the debt. How can you make those comparable with a standard discount rate on the net present value? These are key technical concepts of how to get to a restructuring. Those will be discussed, and I also expect a discussion of arrears, treatment of arrears, of penalty interest, and of surcharges, all of which become important as the debt restructuring process is dragged out. If the timeline can be accelerated, some of the technical issues can be less burdensome.
With regard to the banking sector, I will only observe--well, I'll observe several things. One is that there's been a major shift in the interest rates from a long period of zero to more normal interest rates. And some entities have a maturity mismatch within that. That means a period of workout to decide what to do with the maturity mismatch. That hits some. There was a liquidity crisis for some U.S. banks as the depositors withdrew their money from Silicon Valley Bank.
If we look worldwide, there will be some other cases of maturity mismatch, but the more pressing challenge, and it came up in meetings yesterday, is the effect on credit--the provision of credit. In both the advanced economies and in developing countries we're seeing the availability of credit go down as banking systems examine their balance sheets.
I think it will be very important for the world to think in terms of how do you have short-term financing going into companies. Short-term financing is the lifeblood of growth. For a company that's trying to add customers, they need to finance the accounts receivable and the inventory that's needed, and the trade finance that's needed in the case that there's imports. This is called working capital. IFC can provide it to private sector companies, but the needs are gigantic for the world. As the banking systems come under strain, there needs to be redoubled efforts to have capital flow to working capital.
That's one reason I've advocated for the central banks, the major central banks, to hold less duration on their balance sheets. The major central banks borrow from the banking systems of their countries and of the world. The Federal Reserve borrows from U.S. banks and from European banks and Japanese banks and then puts it into long-term bonds. And some of that capital has to be liberated and allowed to flow into working capital so that there can be relief within the customers of banks. That's actually an urgent problem. There needs to be more credit provision from the banking sector, and there was ample discussion yesterday of the reduction of credit going out from banks in the advanced economies and around the world.
I was in West Africa two weeks ago, and the regional markets have been slowing down and shutting down there. That comes on the back of the international markets also closing down. As we think about the impact on developing countries, this is a severe shock in terms of their financing, and I really think it needs urgent address by the advanced economies of what's going to be done in order to allow working capital financing to start flowing again. Thanks.
President Malpass, just to say, do you think that the World Bank has become too politicized, both--so, your own departure seems to be, in some respect, an orchestrated departure over climate change and battles in the media over climate change. And secondly, the way the whole debt issue is playing out, that also seems to be very political. So, the Bank seems to have become a battleground between the U.S. and China and a battleground over climate change.
I'll put--I'll answer in a different context. If we think about world history over the last 50 years, and I've been active--I joined the U.S. Government in 1984; I don't know how long ago that is. But the international financial institutions, the IFIs--so, the IMF and the World Bank and the other institutions--have always had to deal with political challenges. That's the nature of the business of the World Bank is to be engaged in countries--they have elections; we have shareholders that are contentious. I've been privileged to work at the World Bank and be President and it was four very busy years. It's a good time for me to look to new opportunities, which I'm doing actively, and for the Bank to make a transition.
To your specific points, as far as on climate, this is not an easy issue for the world. I don't know that it was particularly focused on the World Bank or on me. It's a world challenge. The mitigation is expensive, so the costs are high, at a time when the world is already facing massive shortages of education and of health care and working to increase those.
That creates a natural balancing that the world is trying to do. I was in the middle of it here at the World Bank. We did a Climate Change Action Plan that very successfully brought the world to the recognition that you needed to integrate climate and development. That was a cornerstone of our Climate Change Action Plan. And that worked well. I think the world has absorbed that and is adopting that, and that was reflected in the evolution process that we're going through at the Bank, where the Board of Directors and the capitals thought about ways they'd like to make it different. But the full recognition is, everyone needs to work harder together to address adaptation. People in developing countries are faced with the consequences of climate change but without the resources to really deal with it.
I guess I wanted to put it in the context that this is natural for international financial institutions to have to deal effectively with their shareholders. I'm very pleased with the outcomes. You know, we've achieved a lot at the World Bank in these years, and that was reflected yesterday in the meeting of Governors. They were very complementary of the World Bank Management, of the staff of the World Bank, and of the achievements of the World Bank. I'm pleased with the direction.
And one of the things I wanted to do was to have a very strong handoff to my successor, and I think that process is going well in addition. I'm looking forward to my transitioning out and also to the World Bank doing good work into the future. Thanks.
Thank you so much. Okay. My name is Nazira Karimi. I am Afghan journalist. As you guys know, Afghanistan situation is very critical. Taliban has power. Just, women situation is so bad.
I would like to ask you what's your assessment about Taliban. Although nobody recognize them, money go to Afghanistan, like 40 million a week. The people--this money go under humanitarian assistance, but Afghan people never get that money. I don't know what's going to be your policy for future toward Afghanistan, all the women situation is very bad.
Thank you. Yes, there's been a really horrible change of direction in Afghanistan that has taken away freedoms of women, and girls. And that affects our programs. What we did--you know, the evacuation itself came suddenly and was traumatic for World Bank staff, but even more so for Afghan people and all of the assistance workers that were in Afghanistan, and the consequences are still being felt.
I was with Chancellor Merkel at the time of the evacuation, in must have been August of 2021. And it was devastating for Germany, who had been participating in Afghanistan and was facing a very sudden evacuation that had not been prepared for. Now, as the World Bank changed our programs, there was a cessation--well, our people came out of Afghanistan, we were able to put them in Islamabad and in Dushanbe--so, in Tajikistan and neighboring Pakistan. They continue--many of them worked hard to continue programs in Afghanistan but it was undercut by the actions of the Taliban.
We worked through the--we are the trustee and work--Afghanistan Reconstruction Trust Fund, ARTF, which has been the donor group, which has continued to have some flow of funds into Afghanistan and we're working hard with donors on their interests in what's the right thing to do in a country that has huge needs, very pressing humanitarian needs; and yet, a government system that is so difficult to work with. That's an evolving relationship that people reassess week by week in terms of, is there anything that can be done to help girls' education? Well, that's difficult. And how can food aid be actually brought into a system where the currency payment systems are not working? So, we have heartfelt concern for the people of Afghanistan. Thank you.
Thank you so much. As you know, Morocco has initiated its energy transition a few years ago. I would like to know your assessment about this transition. Thank you very much.
Thank you. And what David was referring to is the Annual Meetings of the World Bank and IMF will be in Marrakesh in October.
And I was in Morocco a year ago. The energy transition consists of a big increase in solar panel installation and production of solar panels; also, the continuation of natural gas as an energy source, which is a reduction in greenhouse gas emissions from the alternative. One of the big concerns going on in the world is the big increase in use of coal within Europe and the long-term contracts that Europe has taken for natural gas supplies and coal supplies, which leaves shortages within many parts of the developing world.
So, what countries are doing is accelerating their solar power plant installations and also trying, and working around the world, to try and secure some supply of natural gas in order to avoid going to diesel generators. As many of you know, the rise of diesel generators in many countries which are high-carbon-intensity energy sources are rising and problematic, in Nigeria, in South Africa, in many of the countries that can afford diesel generators.
One of the things we're trying to do is avoid that outcome for developing countries. It was also discussed at some length yesterday the challenge of access to electricity. This was one of the fundamental Sustainable Development Goals, and there are still 800 million people around the world that don't have access to electricity, and the concern is that number is going up as some of the grids break down in some of the major electricity-producing countries around the developing world. That itself is a concern, that people--we're moving into a situation where people who had electricity lose access to electricity. And renewables can supply some of the backup, and it's doing that and we're working actively in battery storage and scalable solar panel techniques, and Morocco is a very strong participant in that program. Thank you.
Thanks, everybody, very much. Thank you, Mr. Malpass.
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Spring Meetings 2023
Join us for a series of live events on today’s pressing development challenges.
All the public events are live-streamed publicly in English with interpretation in Arabic, French and Spanish.
Throughout the Spring Meetings, The Zone provides a round-up of all the week’s happenings.