The Finance Minister, Ken Ofori-Atta, has completed his two-year tenure as the chairman of the Development Committee (DC) of the World Bank and International Monetary Fund after chairing his fourth DC plenary meeting.
The committee discussed a build-back strategy for the global economy, given the unprecedented ravages caused by COVID-19.
The pandemic has resulted in the largest global economic contraction of the past eight decades. It has also overwhelmed health systems, disrupted productivity, exacerbated job losses, reduced incomes and threatens global food security, particularly for the most vulnerable people.
World Bank response to COVID-19
The plenary considered two main topics: “Leaning Forward to Save Lives, Scale Up Impact and Get Back on Track: World Bank Group COVID-19 Crisis Response Update” and the “Joint IMF-WBG Staff Note on the Implementation and Extension of the Debt Service Suspension Initiative”.
Opening the plenary, the minister said: “The crisis is threatening to reverse years of development gains and throw hundreds of millions of people back into poverty.”
Stressing the importance of the G20 Debt Service Suspension Initiative (DSSI) to give fiscal space to economies, Ofori-Atta said: “Since its endorsement, many of the poorest countries have worked closely with official bilateral creditors.
“The moratorium has been a critical liquidity intervention to save much-needed resources to tackle the crisis before us.” He suggested a two-year extension and re-examination of the DSSI.
The World Bank president, David Malpass, asserted that there was a need for a new approach for a fair and balanced relationship between creditors and debtors, beyond the DSSI. He also said he is looking forward to a new framework that will lead to reduction of debts.
On the question of vaccine finance, Malpass told the committee that the bank’s board of directors has approved additional financing of up to US$12 billion to help countries purchase and distribute vaccines. This will ensure that initial vaccine doses are available to those who need them first in countries with limited access which are dependent on the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD).
“Financing will be available immediately,” Malpass said. The World Bank then announced the extension of its support for the DSSI by six months.
Ofori-Atta suggested that, by way of a “global good”, the world needs to be more innovative about providing free access to everyone.
Uneven fiscal response
In her remarks, the IMF managing director, Kristalina Georgieva, highlighted the uneven fiscal response by developed countries, in stark contrast to developing economies.
She said that developed economies have deployed fiscal stimulus of about 20% of GDP on average, emerging markets up to 6% of GDP, while low-income/developing countries (LIDCs) have deployed 2% on average.
The international community should therefore not withdraw fiscal support from developing economies prematurely, as they remain the most vulnerable group, she said.
“LIDCs need strong support from the international community to overcome the crisis and embark on a sustained recovery,” Georgieva said.
Calls for debt cancellation
In his concluding remarks, Ken Ofori-Atta said that COVID-19 has brought the world to a precipice, a point where critical action must be taken to avert imminent disaster.
Much has been said within the past eight months about the coronavirus and what needs to be done to ensure a just and inclusive recovery for all, but a lot more needs to be done. He said that the DSSI needs to act to reduce national debts and emphasised the need for the United States and European countries to facilitate the issuing of new and unused special drawing rights (SDRs).
In the spirit of comparable treatment of all creditors and to ensure universal participation, China and private sector creditors should also engage African countries specifically for a debt restructuring programme, Ofori-Atta said. And finally, he argued, there should be debt forgiveness and cancellation for vulnerable and debt-distressed countries.
He called for a special secretariat to work towards establishing a “fit for purpose” new global financial architecture as was done after the Second World War by setting up the Bretton Woods institutions. He proceeded to acknowledge the great leadership and passion that the Fund and Bank have shown over the period under the leadership of Georgieva and Malpass.
“Silence of friends”
The minister reminded colleague ministers and international financial administrators of his farewell note, “A Call to Righteous Action” – circulated to members of the committee and executive directors of the World Bank Group.
In the note, he shared a collection of artwork and symbolism which, over the years, have been life-changing tools of reflection for him through his time a Achimota School in Ghana, Columbia College and Yale in the United States, on Wall Street, as a Henry Crown fellow of the Aspen Institute, during his life as an entrepreneur in Ghana and in his Christian faith.
The minister summed up his reflections with the words of Martin Luther King: “In the end, we will remember not the words of our enemies, but the silence of our friends.” And he encouraged the guardians of the global financial architecture, saying: “The burden of responsibility we feel today should stir us to righteous action; and if we seek His righteousness to guide us, I am confident that together we will be victorious!”
Ofori-Atta handed over to Mia Amor Mottley, the prime minister of Barbados who is also the island nation’s finance minister, and Azucena Arbeleche, Uruguay’s minister of the economy and finance, who have been selected as sequential DC chairs starting in November 2020 and ending in October 2022.
The 2020 development committee plenary meeting was held virtually on Friday (16 October 2020). The committee is an interministerial group of finance and/or development ministers who represent the full membership of the Bank and Fund.