World Bank Group President David Malpass said widening inequality is his biggest concern about the global economy, calling on advanced nations to do what they can to assist poorer countries as they grapple with high inflation.
Malpass pointed to global food prices, which has exacerbated hunger in impoverished nations.
The United Nations World Food Programme has said 345 million people are approaching starvation across more than 80 countries, a 25% increase from the start of the year.
“That does keep me up,” Malpass told Yahoo Finance on the sidelines of the Federal Reserve's recent conference in Jackson Hole, Wyoming. “We try to get countries to do better policies in the developing countries, but I think a huge amount of the burden has to be with the advanced economies.”
Malpass said advanced nations could help by producing more natural gas, a raw material for fertilizer production that supports food supply.
Russia’s invasion of Ukraine continues to wreak havoc on energy markets, contributing to a rise in natural gas prices and a reduction in fertilizer output. That risks leaving impoverished nations, which may lack the ability to pay higher prices, with increased food insecurity.
Combined with harsher climate events like droughts and floods, Malpass said the World Bank hopes to work with poorer countries on improving infrastructure. “We want to have better food systems,” Malpass said.
The World Bank’s data shows that the cost of importing food is rising the fastest for the most indebted countries.
Building that infrastructure will require attracting capital, which Malpass said is another major issue. With higher interest rates coming from the Federal Reserve and other major central banks, funds are flowing out of poorer countries and into advanced nations able to absorb the impact of higher inflation and meet more expensive debt burdens.
At the Jackson Hole conference, Fed Chairman Jerome Powell made the message clear that more interest rate hikes are coming. The European Central Bank and the Bank of England, among other central banks, have sent similar signals.
Higher interest will put poorer countries, typically saddled with more expensive debt loads, in an even less advantageous position to finance policies to reverse food insecurity and poverty trends.
“The inequality comes from this allocation of capital to parts of the global economy that already have enough capital,” Malpass said.
The World Bank chief said advanced economies should work with poorer countries to restructure their debt amid this “unbalanced global system.”
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.
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