Malpass: It Will Take Years for Africa to Recover from COVID-19 Disruptions

The President of the World Bank Group, Mr. David Malpass, during an interactive session with journalists from West and Central Africa, fielded questions on developments in economies in the region. Obinna Chima brings the excerpts:

In 2020, Nigeria requested for a $3 billion loan from the World Bank. We were able to get $1.5 billion of that, how soon are we expecting the balance or is there any reason for the prolonged delay in granting the country the loan request?

I want to say one thing, Nigeria has huge potential. And with some of the improvements in the economic policies, the growth can be rapid for people across Nigeria. We’ve encouraged efforts that would reduce the subsidies for fossil fuels, which would encourage trade across borders, where Nigeria could be doing more in that area. And very importantly, the multiple exchange rates has been a burden on the people of Nigeria, and we’ve encouraged the unification of rates so that money and investment and remittances can flow in and out of Nigeria with less friction. Our program remains strongly supportive of the people of Nigeria and of Nigeria. As we speak, we have probably the largest portfolio of the World Bank in Nigeria. More than $12 billion. Those are programs under implementation covering a variety of sectors, access to electricity, water, education, health, agriculture. Especially for this year, indeed, we have prepared a pipeline – we had a pipeline of a number of programs and we have delivered about $2 billion for Nigeria in order to help the population have access to critical services but also to support governments and institutions to provide some technical assistance to a variety of stakeholders. The conversation on Nigeria continues around some of the critical reforms that I think Nigeria has been making for some time and we have seen progress.

At the recent meeting in Paris, the term “lost decade” was used by some political leaders. Do you believe that we are in danger of having a lost decade in Africa? And what can we do to avoid it, or what debt relief will have to do with the solution?

Yeah, thank you. Well, COVID itself was a historically large setback, and it was particularly harmful for people–for the poorest and most vulnerable. And so, from that standpoint, we recognise that it will take years to claw back some of the losses. I mentioned earlier the education system. By having the advanced economies close down, and then the education systems–often, schools closed–children weren’t able to move forward, and that’s a critical part of the future of every country, and especially in Africa with the youth. So, we’re working very hard to avoid a lost decade; I want to say that. And I think there are still pathways forward in order to avoid having all of the setbacks extend in Africa. I want to give some specifics on that. One is from the vaccination effort. We have to get vaccination started in more countries, and that means getting the supply, and that means those countries with excess releasing the supply. And that means using programs that are ready, that are on the shelf, that are on websites, and fully disclosed as the World Bank programs are, to get vaccinations to people across their countries. That’s a key starting point. And then, I wanted to say a second vital area is on debt. Oftentimes, the term “lost decade” is applied to Latin America, and I worked throughout the 1980s on the Latin debt crisis. And we’re trying hard to avoid the situation that occurred in that crisis where, year after year, the debts were rescheduled, they were pushed forward into the future, but never actually reduced. And so, the new investment couldn’t come in because they realised that they were going to end up be used to pay previously contracted debt. There needs to be a mechanism for those countries in Africa that have unsustainable debt burdens, for them to have actual debt reduction, debt relief. And that’s what we’re working on. That’s what we’re trying to do with my call over a year ago for a debt moratorium. The G-20 put forward the debt suspension initiative, which delayed the payments but kept the interest rates compounding on that debt. And now, we have the Common Framework, where it faces the obstacles from the debt being much of the key debt being collateralised, being non-disclosed as far as the contracts, and these are obstacles to successful debt restructuring and raises the concern or the possibility of a lost decade; so, we’re working on that.

And then my final point, is on the economic advancements themselves. Many countries have key things that they could be doing in terms of digitalisation, in terms of trade facilitation, in terms of unification of exchange rates, in terms of the business climate being improved, in terms of infrastructure, which is so vital. All of those things could be done more. And I would like to cite Sudan. We are making progress in Sudan. And you know there was a major conference in Paris on the progress on Sudan. We were able to clear our arrears, then the African Development Bank’s arrears. And now, the IMF’s arrears are on track to being cleared. And that enables the international system to help Sudan. And then, in order to accomplish that, Sudan was taking very important steps to help itself through the unification of the exchange rate and other reforms that are really working. I encourage each country to work to avoid the last decade that is still a risk for the continent.

During the summit in Paris, the President of Senegal, Macky Sall, asked developed countries to release their vaccines to other countries and to work with institutions such as the World Bank. What do you think about that?

He and other leaders were very effective at the conference in expressing visions and goals. I know Senegal has been an integral part of finding solutions to problems and moving forward and is involved already in the vaccination effort.

You talked about how the pandemic has escalated public debt in Ghana, what is the policy recommendation to help deal with our rising debt stock and are there proposed policy recommendations for Ghana to help deal with its rising debt stock going forward?

One issue is to try to hold down the non-concessional debt that is being taken on, and non-concessional means higher interest rate because that burdens the future generations. Another important step is the transparency on both the debt taken and the investment projects that might be funded by that debt. These are big challenges. Also, working closely with World Bank and IMF as we both look to have countries have sustainable debt burdens rather than unsustainable debt burdens. In fact, Ghana’s geographical position and reform has proceed over the last couple of years. Of course, placed it in a very unique situation in Africa. We are preparing a new Country Partnership Framework in Ghana with the new government in place, and we are also using a very inclusive approach in order to make sure that the private sector and the civil society will be part of the dialogue that will lead to preparing of

a new strategy. It is clearly very critical to push in order to make sure that the depth of policy will be conceived for better investment and better results for Ghanaian population. And also, I think the poverty reduction agenda in Ghana has made some progress. This also has to be also be sustained. I think the principle that David has already mentioned regarding how debt should be managed will be critical in that regard. And as we think about debt for countries, the world has seen a major reduction in interest rates, into zero or even negative for some of the borrowers; whereas, for some borrowers in Africa, the interest rates are still high. So, one of the questions to creditors and to potential lenders is, are there ways to have much lower interest rates for debt as it is rolled over in Africa. The World Bank is working in particular to have concessional debt levels and also to have grants and zero interest rate loans through International Development Association (IDA), as sources of financing for countries, in general. And that’s a high priority, to try to find light at the end of the tunnel so that the people of Africa are not constantly under the burden of unsustainable debt.

In terms of supply of vaccines for African countries, it seems that the Bank already had a plan to help African countries, but what did the Paris Summit change because we’re talking about multilateral initiatives?

Well, there was clearly the recognition at the Paris meeting that vaccines were at the top of the list of concerns by the leaders of Africa. One of the challenges has been to achieve more transparency in terms of what the manufacturers are able to produce, and what the constraints are on those manufacturers in terms of getting their product to developing countries. In many cases, this means the options that some governments have, even if they may have sufficient supply, they’re retaining options which constrain the delivery of vaccines to the developing countries. That clarity of transparency is what the World Bank is calling for with the release on our website showing very clearly the documents and the documentation of our programs, and we encourage others, including the intermediaries, the manufacturers, and the countries that are controlling the manufacturing, to release more information about the constraints on that supply.

There is a strong trend towards the promotion of thermal power plants, with implications in terms of production costs and pollution. What is the World Bank’s interpretation of this race for thermal energy, given its growing interest in climate change issues?

Regions of the world need to think about where they’re going to get electricity access, and do it in a way that has the lower carbon output. And what has been happening. As the demands go up rapidly, the fastest way is with techniques that are carbon-intensive, which is the opposite of where the world would like to go. The World Bank wants to work with countries on their long-term strategy, meaning, where will they get the growth in electricity access that they need? And what are the lower-carbon sources of energy that are available? This might be hydro; it might be natural gas; it might be improvements in the transmission grid that save electricity and allow more renewables to be brought on stream. We have solar projects in many of the countries that are successful at bringing low-cost, clean energy to the countries, but they also need the expansion of base-load in the city areas. These are all parts of our climate change action plan that are important in moving this along. One other thing that we mentioned in the elements of our Climate Change Action Plan is the importance of countries reducing the subsidies that they apply for fossil fuels. That often takes the form of subsidies to the electricity generation facilities that give them fossil fuel energy at a lower cost than the market cost or than the full cost to the world. So, we’re working on all of those through IDA, through IBRD, and also very much by trying to encourage countries to align their development practices–I mean, their development goals, which certainly include clean energy for the health–you know, in urban areas, they’re clogged with the output, the emissions, from thermal plants.