The institutions created by the Bretton Woods accords, the International Monetary Fund (IMF) and the World Bank, are seeking more resources to broaden their focus in the face of the new challenges of this century. The setbacks to the economy, which have geopolitical origins, are no longer exceptional in a world in which multiple climate and health crises are linked. The World Bank has already taken the first step by taking on the task of combating climate change. Anna Bjerde, executive director of the institution responsible for operations, said in an interview during the meetings of the two organizations in Marrakech that the previous missions of the two organizations – poverty reduction and global prosperity – cannot be separated from this new goal.
Questions. Does the World Bank now have a new goal?
Answer. We are very excited. The World Bank Governors have endorsed our new vision and mission to address poverty on a livable planet. Our goal has always been to end poverty, but the habitable part of the planet is new. We believe that without taking climate change into account, neither poverty can be reduced nor prosperity can be increased. But we go further. We saw that the pandemic hit the world so hard because no one was prepared to deal with it, so we want to focus on healthcare. And we also want to address fragility, as we have seen that both climate and health vulnerabilities cross borders and ultimately affect everyone.
Q Can we then say that the World Bank and the IMF are trying to prepare for a world that will be vulnerable to shocks?
R. Naturally. And I think another great outcome of the debate at the IMF and World Bank annual meetings was that we need to prepare for shocks, which will be the new normal. That’s why we talked about how to equip countries with preparedness tools and institutional and financial arrangements to respond quickly to such shocks. We think a lot about the crisis response toolkit.
Q They say public enemy number one is inflation, but this battle is causing distress for many countries due to rising debt costs. Are you prepared for more countries to go bankrupt?
R. We are concerned about levels of debt, particularly in low-income countries. We estimate that around 60% of these countries are affected or threatened by excessive indebtedness. And we support the Common Framework for the global debt restructuring process, but we believe it is progressing slowly. We would really like it to progress more quickly. We try to help countries analyze their debt profile and ensure that when they take on debt, they do so to carry out good projects and achieve good results. And if these countries are already struggling, we turn to aid financing.
Q Some NGOs such as Debt Service Watch warn that low-income countries are facing a debt crisis that may be even worse than before. How will they manage the investments needed to meet the climate challenge?
R. That’s a very good point. We spent three years chaining crises together. Many countries in the developing world went into debt in response to Covid and then to the rising cost of living, energy prices and food insecurity. All of this has put pressure on their financial performance. At the same time, we now have very strict financing conditions worldwide. So countries not only have to dedicate a very large part of their budgets to paying off debt, but also prepare for natural disasters and climate impacts. We must work with countries to address crises and shocks that are no longer isolated but are part of the new normal. The green transition will require huge investments, so we need a financial architecture that allows resources to be transferred to where the climate fight needs to be carried out. To give just a few 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 from the G-20 that speaks of four trillion dollars annually by 2030. Where will this money come from?
A. It’s a huge amount. It is therefore necessary to give the multilateral development institutions the financial capacity to do more. But it also means that we need to focus much more on mobilizing the private sector at a much higher level than today and working with countries to mobilize domestic resources. And we also need governments to mobilize domestic resources, which means reforming tax systems and administration.
Q. What do you expect from the US and Europe in this fight?
A. We hope for a global coalition on climate change. And I think we need to recognize that countries that didn’t cause climate change but are most affected need to be supported. Secondly, we must 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 those we recently adopted for Uruguay, which provide for a reduction in interest payments if the climate targets are achieved.
Q. And is the creation of a global alliance possible when we warn of major 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 that countries need to come closer to each other, even if it may seem complicated.
Q: China is gaining ground in providing loans and trade assistance 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 as they borrow for investment and development, it is important that we work together to ensure that sustainability assessments are carried out regularly and data and information are shared. Actually, we welcome everyone’s participation because mobilizing resources is important, but it must be transparent.
Q. But doesn’t the presence of China among creditors complicate debt processes?
A. We believe the Common Framework approach is the right one because it brings everyone to the table. The problem is that progress is very slow.
Q. The meetings noted a climate of concern about the economic outlook, which appears weak in the medium term and plagued by obstacles and major challenges. What is your perspective?
A. We face challenges. Global growth is not particularly remarkable in the medium term, and without growth we cannot achieve poverty reduction. Therefore it needs to be reactivated. We need to focus on some areas of a structural nature that we know work. Firstly, 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 digital use Technologies. 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 them gain traction in renewable energy. 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 labor force participation is low. Many countries now have very tight labor markets, right? Imagine if we could integrate all these women into this workforce… That would be a huge contribution to the growth we need to see. And young people because they are the agents of change in the world. That’s why I would like to see a much stronger debate about vocational training as part of the solution.
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