David Malpass: World Bank Needs New Approach to Resolve Poverty in Emerging Markets
The COVID-19 pandemic and the economic shutdowns are dealing a severe blow to the global economy and especially poorer countries - Photo by G20 Secretariat

JAKARTA (TheInsiderStories) – The COVID-19 pandemic and the economic shutdowns are dealing a severe blow to the global economy and especially poorer countries. Developing countries and the international community can take steps now to speed recovery after the worst of the health crisis has passed and blunt long-term adverse effects.

Short-term response measures to address the health emergency and secure core public services will need to be accompanied by comprehensive policies to boost long-term growth, including by improving governance and business environments, and expanding and improving the results of investment in education and public health.

To make future economies more resilient, many countries will need systems that can build and retain more human and physical capital during the recovery – using policies that reflect and encourage the post-pandemic need for new types of jobs, businesses and governance systems.

The scope and speed with the COVID-19 pandemic and economic shutdowns have devastated the poor around the world are unprecedented in modern times. Current estimates show that 60 million people could be pushed into extreme poverty in 2020. These estimates are likely to rise further, with the reopening of advanced economies the primary determinant.

“Policy choices made today – including greater debt transparency to invite new investment, faster advances in digital connectivity, and a major expansion of cash safety nets for the poor – will help limit the damage and build a stronger recovery,” said World Bank Group President, David Malpass, in an official statement released on Tuesday (06/02).

He continues, “The financing and building of productive infrastructure are among the hardest-to-solve development challenges in the post-pandemic recovery. We need to see measures to speed litigation and the resolution of bankruptcies and reform the costly subsidies, monopolies and protected state-owned enterprises that have slowed development.”

Last April, World Bank Group announced to deploy fast track support up to US$160 billion over the next 15 months to help the countries fight the COVID-19. So far, the Fund has disbursed in a dozens of countries.

While, its financial armed, the International Finance Corporation’ (IFC) prepared for a total of $8.9 billion. Malpass said, the Multilateral Investment Guarantee Agency (MIGA) launched a $6.5 billion facility to support private sector investors and lenders in tackling the virus spread.

He adds, the facility redirects MIGA’ capacity toward the purchase of urgent medical equipment, providing working capital for small and medium enterprises, and supporting short-term funding needs of governments.

He also revealed, that the agency have been working to provide debt relief for poor countries based on the World Bank – International Monetary Fund (IMF) Joint Call to Action for Debt Relief for IDA countries. The implementation was discussed twice this week in meetings at the G20 International Financial Architecture Working Group, he noted.

Last month, World Bank and IFC approved an increased of $14 billion package of fast-track financing to prevent, detect and respond to the rapid spread of COVID-19. The amount higher than previous announcement in March 4.

It said, IFC will increase its COVID-19 related financing availability to $8 billion as part of the package, up from an earlier $6 billion, to support private companies and their employees hurt by the economic downturn caused by the spread of the virus.

“This package provides urgent support to businesses and their workers to reduce the financial and economic impact of the spread of COVID-19,” said Malpass on March 18.

He continued, the additional $2 billion builds on the announcement of the original response package on March 3, which included $6 billion in financing by the World Bank to strengthen health systems and disease surveillance and $6 billion by IFC to help provide a lifeline for micro, small and medium sized enterprises, which are more vulnerable to economic shocks.

Philippe Le Houérou, CEO of IFC elaborated, $2 billion from the Real Sector Crisis Response Facility, which will support existing clients in the infrastructure, manufacturing, agriculture and services industries vulnerable to the pandemic. IFC will offer loans to companies in need, and if necessary, make equity investments. This instrument will also help companies in the healthcare sector that are seeing an increase in demand.

Then, another $2 billion from the existing Global Trade Finance Program will cover the payment risks of financial institutions so they can provide trade financing to companies that import and export goods. IFC expects this will support small and medium-sized enterprises involved in global supply chains.

Furthermore, $2 billion from the Working Capital Solutions program, which will provide funding to emerging-market banks to extend credit to help businesses shore up their working capital, the pool of funds that firms use to pay their bills and compensate workers.

A new component initiated at the request of clients and approved on March 17 was $2 billion from the Global Trade Liquidity Program, and the Critical Commodities Finance Program, both of which offer risk-sharing support to local banks so they can continue to finance companies in emerging markets.

Written by Staff Editor, Email: theinsiderstories@gmail.com