The institutions born with the Bretton Woods agreements, the International Monetary Fund (IMF) and the World Bank, are seeking more funds to broaden their focus in the face of the new challenges imposed by this century. The blows to the economy of geopolitical origin are no longer something exceptional for a world that is chaining several climate and health crises. The World Bank has already taken the first step by assuming the mission of fighting climate change. Anna Bjerde, managing director of the institution responsible for Operations, considers in an interview during the meetings of both organizations, held in Marrakesh, that the missions it already had until now—poverty reduction and global prosperity—cannot be separated from that new goal.
Ask. Does the World Bank now have a new objective?
Answer. We are very excited. World Bank Governors have endorsed our new vision and mission on poverty on a liveable planet. We have always set out to end poverty, but the part of habitable planet it’s new. We believe that poverty cannot be reduced or prosperity boosted without taking climate change into account. But we go further. We saw that the pandemic hit the world so hard because no one was ready to deal with it, so we want to focus on health preparedness. And we also want to address fragility, since we have seen that both climate and health weakness are cross-border and end up affecting everyone.
Q. Can we say then that the World Bank and the IMF are trying to rearm themselves to face a world that is going to be prone to shocks?
R. Of course. And I think that another of the great results of the debate at the annual meetings of the IMF and the World Bank has been that we must prepare for the shocks, which are going to be the new normal. So we have discussed how to arm countries with preparedness tools and institutional and financial arrangements to respond quickly to those shocks. We’re thinking a lot about the crisis response toolkit.
Q. They say that the public enemy number 1 It is inflation, but that battle is putting many countries on the ropes due to the increase in the cost of debt. Are you prepared for more countries to go bankrupt?
R. We are concerned about the level of debt, especially in low-income countries. We estimate that around 60% of these countries are in a situation or risk of over-indebtedness. And we are supporting the Common Framework for the global debt restructuring process, but we believe it is moving slowly. We would very much like it to progress faster. We try to help countries analyze their debt profile and ensure that when they go into debt, they do so to carry out good projects and obtain good results. And when those countries already have problems, we turn to aid financing.
Q. Some NGOs, such as Debt Service Watch, are warning that low-income countries face a debt crisis that may be even worse than before. How are they going to face the investments necessary for the climate challenge?
R. That’s a very good point. We have lived three years chaining crises. Many countries in the developing world went into debt to respond to Covid and then the rising cost of living, energy prices and food insecurity. All of this has put pressure on their financial capacity. At the same time, we now have very strict financing conditions around the world. So in addition to having to allocate a very important part of their budgets to paying debt, countries have to prepare for natural disasters and climate impacts. We have to work with the countries for what are no longer crises and shocks isolated, but are part of the new normal. The green transition is going to require massive amounts of investment, so we are going to need a financial architecture that allows resources to be transferred to where the climate fight must be carried out. To give some numbers: Africa faces some of the most serious climate impacts, but only 3% of global climate finance goes to the continent.
Q. There is an estimate made for the G-20 that speaks of four trillion dollars annually until 2030. Where will that money come from?
A. It is a huge amount. That is why it was necessary to provide multilateral development institutions with the financial capacity to do more. But it also means that we must focus much more on mobilizing the private sector to levels much higher than today and working with countries to mobilize domestic resources. And we also need governments to mobilize domestic resources, which means reform in tax systems and administration.
Q. What do you expect from the US and Europe in this battle?
A. We hope for a global coalition around climate change. And I think we need to recognize that countries that didn’t cause climate change, but are the most affected, need to be supported. Second, we need to transfer resources on the most favorable terms possible. In some cases, this must be a full subsidy. Or it must be articulated with instruments such as the one we have recently approved for Uruguay, which contemplates a reduction in interest payments if climate objectives are met.
Q. And is creating a global alliance possible when we are warning of great global fragmentation?
A. I think there is a global understanding of the problems and existential threat of climate change. I think that the fragmentation and tensions in the world unfortunately affect us and countries must get closer, although it may seem complicated.
Q. China is gaining ground in providing loans and trade aid to countries in Africa, Latin America and Asia. Do they perceive it as a threat?
A. I don’t necessarily see it as a threat. Countries need investment, but it is important that when they take on debt for investment and development we work together to ensure that sustainability assessments are carried out regularly and data and information is shared. Actually, we appreciate everyone’s participation because resource mobilization is important, but it must be transparent.
Q. But doesn’t the presence of China among the creditors make debt processes more difficult?
A. We believe that the Common Framework approach is the right one, because it brings everyone to the table. The problem is that progress is very slow.
Q. In the meetings, a climate of concern has been noted about an economic outlook that in the medium term appears weak, plagued by obstacles and great challenges. What is your perspective?
A. We have challenges ahead. Global growth in the medium term is not very remarkable, and without growth we cannot achieve poverty reduction. That’s why it has to be reactivated. We need to focus on some areas of a structural nature that we know work. First, it is never a mistake to invest in human development, so it is a great opportunity to create education, health and social security networks for those who need them, supported by a focus on women, youth and the use of digital. Second, we must turn energy challenges into an opportunity to accelerate the green transition. Countries know that the path to decarbonization is inevitable, which is why we are already seeing how they are accelerating in renewables. And it is an opportunity for local services and industry. And third: women and young people. Women make up 50% of the world’s population, but their participation in the workforce is low. Many countries now have very tight labor markets, right? Imagine if we could get all those women into that workforce… It would be a massive contribution to the growth we need to see. And young people because they are the agents of change in the world, so I would like to see much more debate about vocational training as part of the solution.
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