High debt and inflation are two big problems facing global growth.
Due to high debt and deficit levels, countries such as Nigeria and other developing economies are under severe financial stress.
Sixty per cent of low-income countries are already in debt distress or at high risk of it.
Speaking yesterday at a roundtable opening section to mark the beginning of this month’s Spring Meetings, Malpass suggested steps to improve the implementation of the common framework on debt and inflation reduction.
The World Bank chief asked Nigeria and others to establish a timeline for forming creditors’ committees, suspend debt service payments and penalty interest and focus on expanding eligibility.
He also called for a simple rule so that it can be evaluated and enforced, and engaging commercial creditors at the beginning of the process.
The debt crisis is expected to continue to worsen in 2022.
On the contagious issue of rising inflation problem, which is causing immense strain, he said policies need to be adjusted to enhance supply, not just increasing demand.
“Markets are forward-looking so it’s vital for governments and private sectors to state that supply will increase and that their policies will foster currency stability to bring down inflation and increase growth rates. This is especially important as global supply chains shift away from dependency,” he stated.
Malpss said central banks need to use more tools under current policies, adding the inequality gap has widened materially, with wealth and income concentrating in narrow segments of the global population.
His said interest rate hikes, if that’s the primary tool, will add to the inequality challenge that the world is facing.
He urged central banks to use more of their tools, not just interest rates.
“Capital is being misallocated now. One of the focal points should be using all the central bank tools so that capital is allocated in a way that helps increase supply. That will be an effective way to address inflation,” he said.
Some of the tools advocated by Malpass include: changing the duration of their portfolio – it would be very helpful to shorten it; encouraging supply through their regulatory policies; providing forward guidance that fosters currency stability and other tools as well to powerfully addressing the inflation problem.
According to his, global trade is still facing quotas, high import tariffs, high export tariffs, expensive food price subsidies, and even export bans on food products.
“These should stop,” he said, adding that the international community needs to immediately step up emergency assistance for food insecurity and help bolster social safety nets.
He announced that the World Bank was providing roughly $17 billion per year to strengthen food security – a big part of the global effort.
On COVID-19, he said the World Bank Group expanded its financing rapidly, reaching $157 billion in the 15 months ending June 2021, with vaccines a big part of this effort.
“We now expect to have committed $11 billion to purchase and deploy vaccines in our current fiscal year ending June 30, benefiting 81 countries. This has been a massive effort by our country teams around the world and has brought hundreds of millions of shots to arms,” he stated.