The World Bank is preparing a $170 billion financial aid package in response to the overlapping global crises of war, pandemic and inflation that are hitting the poorest countries particularly hard, its president said.
David Malpass warned that Russia’s invasion of Ukraine had added to the pressures caused by the Covid-19 crisis and the soaring cost of living, and that assistance was needed quickly.
Under proposals to be discussed with World Bank member governments at the Washington-based organization’s spring meeting this week, $50 billion would be spent over the next three months, with additional funding of $120 billion. billions of dollars delivered over the next year.
“I am deeply concerned about developing countries,” Malpass told reporters. “They face sudden increases in energy, fertilizer and food prices, and the likelihood of interest rate increases. Everyone hits them hard.
World Bank president says more expensive food and energy, higher interest rates, war in Ukraine and coronavirus-related shutdowns in China mean the global economy is now set to grow by 3, 2% this year, compared to the 4.1% it predicted in January.
The Bank’s sister organization, the International Monetary Fund, will revise its growth forecasts downward when it releases its half-yearly global economic outlook on Tuesday. In a chapter of the outlook released ahead of its official launch, the IMF expressed concern about a buildup of private debt, which it said could reduce cumulative growth by 0.9 percent in advanced economies and 1.3 % in developing countries over the next three years. years.
“People are facing development reversals for education, health and gender equality,” Malpass said. “They face reduced commercial activity and trade. In addition, debt crises and currency depreciations weigh heavily on the poor.
“Food crises are bad for everyone, but they are devastating for the poorest and most vulnerable. There are two reasons. First, the world’s poorest countries tend to be food-importing countries. Second, food accounts for at least half of total household budget expenditures in low-income countries, hitting them the hardest. »
Malpass said central banks should not rely exclusively on interest rates to fight inflation. “Central banks need to use more tools under current policies.
“The inequality gap has widened dramatically, with wealth and income becoming concentrated in narrow segments of the global population. Rate hikes, interest rate hikes, if that’s the main tool, will actually add to the inequality challenge that the world is facing.
The World Bank President added: “We are preparing for a continuous crisis response given the multiple crises. Over the next few weeks, we will be discussing with our Board of Directors a new 15-month Crisis Response Envelope of approximately $170 billion to cover the period from April 2022 to June 2023. We plan to commit approximately $50 billion of this amount over the next 3 months. ”
The World Bank and IMF are concerned about the number of countries struggling to pay their creditors at a time of slowing growth and rising global interest rates.
Malpass said improvements were needed to the common framework – a mechanism to help countries deal with their debt burden – which has been criticized for being too slow and too limited in scope. “Due to high debt and deficit levels, countries are under severe financial stress,” he said.