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World Bank’s Malpass: Need more transparency on vaccine rollout, debt servicing

World Bank President David Malpass sat down with Yahoo Finance’s Brian Cheung to discuss how the international organization is handling the COVID-19 pandemic across the globe.

Video Transcript

MYLES UDLAND: Yahoo Finance Brian Cheung wrapping up an interview recently with World Bank president David Malpass. Brian Cheung joins us now to talk about what the two of you talked about. It's been a busy week for you interviewing major newsmakers in the world of global banking, global central banking. Tell us a bit about the conversation with David Malpass.

BRIAN CHEUNG: Thanks, Myles. Well, obviously, the World Bank one of these large international bodies that deals with trying to lift up impoverished nations. And the biggest story, not just for those countries but for the whole globe, is really about the vaccine roll-out. The World Bank is behind a global initiative-- or part of one of the participants-- in COVAX. It's a stockpile of vaccines to distribute across the world.

Now, the World Bank has its own initiatives which it works with 40 countries or hopes to work with 40 countries on. So what exactly is the status of the vaccine roll-out? Here's what David Malpass-- again, the president of the World Bank-- told me this morning.

DAVID MALPASS: What the World Bank does is works directly with countries to provide funding. And so some of the countries are using that funding to make the copayments to COVAX. And then some have been able to get supply through that channel. Others go directly to the manufacturers and use the funding in order to get vaccines into the countries. So what we're trying to do is have as many people vaccinated as quickly as possible in a fair and safe way.

And so we're pushing forward. I'm hoping we'll have 40 countries with funding available through the World Bank financing contracts within the near-term time frame. So that begins to create the flow. But the key here is to have more transparency in all of the contracts that are between the manufacturers and the intermediaries so the World Bank group and others can find ways to provide additionality. One of the things we haven't been able to do yet is to buy new manufacturing capacity, because it's not clear how much of the existing capacity is already tied up in options, for example, and in other production commitments.

BRIAN CHEUNG: And what's really challenging about this question is that this is all happening at a time when some of the advanced nations that are manufacturing these vaccines are grappling with how much they should be keeping for their own domestic citizens and how much they should be shipping across the border. We saw here in the United States on Monday that the White House clarified they don't want to share vaccines at the moment with Mexico, for example. Are you satisfied with the level of cooperation that not just the United States, but other global bodies, major manufacturers, are handling the vaccine distribution, given those kind of fairly valid concerns?

DAVID MALPASS: There's a lot of communication going on among the various players-- the big countries, the manufacturers, COVAX, the World Bank. And so I think that's moving along. We had the G20 meeting on Friday of the finance ministers and the central bank governors, and I spoke there about the importance of the transparency of contracts. That would help immensely if there could be more disclosure of how much has been committed, so then you can work on getting more commitments and more of it going to the poorer countries.

So I think there's communication going on on it. But what we need now is to simply have more supply and more shipments going into the people that are most in need.

BRIAN CHEUNG: So let's talk about what's at stake here-- the World Bank projections that are now cast have poverty rising to 733 million people in this pandemic. That would imply throwing about 90 million people into poverty, and that would erase years of progress that we had before the pandemic. We last spoke here on Yahoo Finance in August, and at the time, you were mentioning that you were really worried about those countries not having the social safety nets to deal with that. Has the picture for those countries gotten better or worse since last time we spoke?

DAVID MALPASS: Some have gotten better, and some have gotten worse. So there's a big group of countries that we call FCV-- fragile, conflict, violent. And that continues to go on creating situations of grave concern. For example, in Yemen, in the Tigray province of Ethiopia, and across the Sahel-- conditions still very difficult from a food security standpoint and from the health standpoint very directly.

Security is also a very real issue for hundreds of millions of people around the world. I was pleased to see in Nigeria the release of the girls that had been abducted in late February. And so that was a positive sign. But it's amid these negative signs of insecurity and deeper poverty. To the solution or the direction that the world needs to head, I think, is toward a greener, more resilient, more inclusive recovery. How do you get a v-shaped recovery for most of the world, not just for the advanced economies?

BRIAN CHEUNG: Well, you mentioned more resources, and a lot of the things that you just laid out are issues or conflicts that had existed maybe even before the COVID-19 pandemic. Now, normally the spend from the World Bank on projects is about $42 billion. But my understanding is that the World Bank had about $71 billion in commitments to the poorest countries through some of your programs. So give us a picture on the types of projects that the money is being used to fund-- specifically within the context of what we are dealing with with the pandemic. And how do you pick and choose what to fund when, honestly, everyone's in need right now?

DAVID MALPASS: Yes, and the resources-- the World Bank is somewhat unique in being able to tap into global markets in large size. So we will raise as a group, the World Bank group, over $100 billion this year that is devoted to development. That's a range of income levels, but all of them on the developing countries side, and much of it going to the poorest countries in the form of grants and very concessional resources. So it's a big support mechanism.

What we're trying to do is have it have the most impact that we can make it on the people of the countries. For example, we were very happy recently to make progress in Sudan. Sudan is three times as big as Texas. It's got twice as many people as Texas, and yet it's extremely poor. And they had been running a dual exchange rate system, where special people got a special price for the exchange rate.

They unified that in late February, which opens up the avenues to much more economic progress. So that's a good step, a big step. I wish that it could be done also in Nigeria and Ethiopia. These are big, populous countries that are running two exchange rate systems-- one for some people and some companies, and then a worse one for most of the people of their countries. And so unifying those exchange rates would be a big step forward.

Remember, in China's economic development, that was the critical step in 1993 when they eliminated the dual exchange rate system. And that ushered in a period of very fast growth that was good for China, good for the people of China, and also good for the whole world as poverty rates went down in China. I mentioned this at the G20 meetings on Friday, and I hope we can make progress on that, but that gives you an example-- in all of the developing countries, there are specific issues that they're confronting that have relatively specific answers.

So the World Bank works directly in the country through a country director and a system within the World Bank to try to encourage the most impactful changes. That extends, of course, to the climate changes. Over the next five years, we'll spend $100 billion on climate change efforts in developing countries. So the World Bank is by far the biggest financier globally of climate-related efforts by countries.

BRIAN CHEUNG: And, David, I want to go back to the climate agenda in a second, but you've been mentioning that you had a direct line to the G20-- you actually addressed the G20 very recently. What did you tell the fiscal and monetary policymakers in those, I guess, virtual rooms, if you will, about how to specifically address the debt servicing needs, relief needs for some of those countries that you laid out? Obviously, the economic situation in those countries that you had laid out-- also countries like Venezuela, Myanmar maybe in the future-- what did you tell those global leaders about how to address the global needs right now?

DAVID MALPASS: So we work specifically at the country level to strongly encourage disclosure of the terms of contracts which has not been done very thoroughly to date. We're making progress on that, and the G20 was supportive in 2020 of more transparency efforts. But there's still a long way to go on that. We also want to see countries identify those that have unsustainable debts.

It's helpful if you can identify that early rather than letting it grow into a bad situation. So identify it early, and then work with the creditors to reduce the net present value of the debt. So that's the effort underway now under the auspices of both the G20 and the development committee that gives input into the IMF and the World Bank activities. So we're working closely with the IMF to try to identify countries that have an unsustainable level of debt that requires trying to find out what all the debt contracts are of these countries-- who signed them, what's the terms, what's the interest rate, and can there be relief offered by the various creditors?

BRIAN CHEUNG: Right. And, David, when we talk about the room for fiscal spending, obviously, it's interesting to see how the industrialized countries were able to spend up to 15% or 20% of their GDPs on stimulus packages, whereas the poorest countries already squeeze on the amount of debt [INAUDIBLE] they have were only able to spend less than 2% by some measures. Now, within the context of climate initiatives, the World Bank has a very active agenda on that front. What does that mean for those kind of less developed countries that might not have the fiscal space to pass aggressive greener initiatives, for example?

DAVID MALPASS: We're working with the countries directly on what are called the indices the NDCs-- the nationally determined contributions, which is the relationship that countries have with the Paris Agreement. So one of the goals is to have the countries embed the NDCs into their development plans so they get a coherent whole, and they actually intend to make progress on it-- through adaptation efforts, being prepared for climate changes, and then also through mitigation.

If they're using coal, if they're using high carbon-emitting electricity and have alternatives, then let's look for a transformation that moves them to lower carbon emissions in their countries. But frankly, most of the carbon emissions are coming from the advanced economies. So that's where a lot of the work has to be done. I wanted to mention also, as we think about the money spent in the poorer countries from their own budgets, it's very important to have as much as possible go to education, to health, to nutrition, to food sources, because these are, indeed, poor countries.

So we need to look for new financing mechanisms for the climate change efforts, also for the debt reduction efforts that I mentioned to you. Those all free up fiscal space for the countries to do climate change efforts, health and education spending. And I think a lot more progress needs to be made on that in order to get more spending at the country level.

Brian, if I may-- the inequality and unfairness of the current global system is striking. The negative effects are most felt by the vulnerable-- by women, by children, by the poorer countries. And so that's part of the unfairness. And the response or the stimulus mechanisms that have been done by the advanced economies-- and I've talked about this before-- but they're very oriented toward helping people in the upper end of the income scales of their countries, rather than the lower income levels.

For example, the central banks buy bonds. And so they borrow from the markets and buy bonds that are issued by very well-heeled corporations or by their own governments. And so that really points the stimulus at the upper crust of the societies and makes the inequality problems even more so.

BRIAN CHEUNG: Yeah, and that contributes, definitely, to the k-shaped recovery. I just wanted to ask lastly-- I mean, you mentioned earlier in the conversation about climate change and how the advanced economies are often the ones that are contributing the most to the issues that we face. Were you encouraged to see the Biden administration rejoin the Paris Agreement? It's worth pointing out to our viewers that you were appointed by the Trump administration, which had a very different stance-- your term is going to last through 2024 at the World Bank. Do you see a ride change in the White House's stance? And is that constructive to the World Bank's agenda on climate?

DAVID MALPASS: Well, I'm pleased with the things that the Biden administration is saying about the need for real transformation in the greenhouse gas area. So they've identified that there are-- I say 15 countries that are the major emitters. And so there has to be a tackling of that problem worldwide, and particularly by the bigger advanced economies of their emissions. So I was glad to see that effort. And I've also been very glad to see the support that's offered by the Biden administration to the resource-- to the resource commitments worldwide.

Some of this is going to take money. Some of it takes transparency-- actual pushing forward. And the Biden administration has been very supportive of that part-- of each part of the agenda to get more development for the poorest countries. I think it's going to be a good relationship, and the World Bank certainly looks forward to working with everyone within the US government and also with all of our shareholders.

BRIAN CHEUNG: Obviously, some very interesting remarks from David Malpass-- again, the Head of the World Bank. Interesting commentary, specifically, on how maybe quantitative easing is actually exacerbating the k-shaped recovery. I'd be interested to see what his counterparts at the Federal Reserve and the European Central Bank happen to think about that. But again, very interesting remarks from the World Bank President on just the widening situation across the globe despite that vaccine roll-out.