•Assemble debtor countries, lenders for global sovereign debt roundtable
•Bank predicts world economy to grow at 3% for five years
Nume Ekeghe in Washinton DC
The President of the World Bank Group, David Malpass and Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva stressed the need for policy makers in Nigeria and other low income countries as well as emerging economies to create targeted financing for
Small and Medium-Sized Enterprises (SMEs) in their countries.
They disclosed that the call for support for SMEs was part of the discussion with low-income countries and emerging markets, adding that such intervention would help enhance inclusive growth, tackle inflation and high-interest rates.
They both made this call at a joint seminar on, “The way Forward: Building Resilient” yesterday, at the ongoing IMF/World Bank Spring meetings in Washington DC.
In addition, the Washington-based institutions also noted that the global economy was expected to grow at three per cent for five years despite an increase in consumer spending in the United States and Europe and China.
It also forecasted that the decline in global economic growth would impact negatively on low-income and emerging economies.
The Fund also added that for the first time, there was an assembly of all creditors and debtors to address the debt crisis globally.
Georgieva said: “Central banks do have a preoccupation to bring inflation down and it is paramount because, without price stability, there is no sound foundation for investments and for growth.
” Their job has become more complicated because of the exposure to vulnerabilities in the financial sector. That means attention has to be paid to financial stability.
“Fortunately, they have different tools they can apply to deal with these two different problems. They can fight inflation by keeping interest rates higher for longer and they can provide targeted liquidity should there be a need to bring down risks to financial stability.”
Furthermore, on an emerging global debt crisis, Georgieva added that for the first time in history, the IMF and WBG have assembled all countries with significant debt and their creditors for a roundtable to restructure debts.
Georgieva added: “We are not letting our guard down on this issue. We are going to have the global sovereign debt roundtable bringing for the first time all creditors traditional new public-private with the debtor countries and the key institutions, so we can sit around the table and find solutions to what otherwise can be devastating for countries.”
On his part, commenting on funding for SMEs, Mallpass said: “And as we look at it, the elements of growth into the future it’s important that there’ll be more investment in small businesses and in new businesses.
“And that means a flow of capital and a worry that we have for developing countries is the capital inflow. is out of developing countries. So there’s that for many of the developing countries that look like they’re in a phase of decapitalisation rather than recapitalisation that goes with your point that instead of having convergence meaning people, people with lower incomes growing faster than people with higher incomes, so convergence toward a higher level, that’s not happening right now. It’s actually a divergence.
“And that’s, that’s gravely concerning, that means inequality, that means fragility, for countries and we see more countries falling into fragility.”
Speaking further on the growth of the world economy, he stated that central banks around the world have to continue to keep interest rates high to combat inflation in a way of restoring the prospects for robust growth.
He added: “We have seen that this rapid transition from low-interest rates, abundant liquidity to higher interest rates and much less available liquidity has exposed vulnerabilities in the financial sector that made the task of policymakers even harder.
“So in that context, what we are projecting for this year is despite the remarkable resilience of consumer spending in the United States in Europe, despite the uplift from China’s reopening global growth would remain below three per cent as we projected earlier this year and what is more concerning, it will remain around three per cent for the next five years. That does not give us high hope for meeting the aspirations of people, especially poor people.”