War in Ukraine pushing poverty higher — World Bank

World Bank Group President, David Malpass has expressed concern over higher poverty rates in developing countries due to war in Ukraine and COVID-19 related shutdown.

A statement issued on Monday by the Bank quoted Malpass as making this known in his opening remark at the World Bank Spring Meetings 2022 media roundtable.

“I am deeply concerned about developing countries. They are facing sudden price increases for energy, fertiliser, and food, and the likelihood of interest rate increases. Each one hits them hard.

“These plus the war in Ukraine and China’s COVID-related shutdowns, are pushing global growth rates even lower and poverty rates higher.

“We have lowered our 2022 growth rate to 3.2 per cent from 4.1 per cent before. People are facing reversals in development for education, health and gender equality.

“They are facing reduced commercial activity and trade. Also, the debt crises and currency depreciations have a burden that falls heavily on the poor,” Malpass said.

While noting that many discussions this week would focus on these topics, Malpass said that World Bank expected the debt crisis to continue to worsen in 2022.

According to him, debt and inflation are two big problems facing global growth.

He said that countries are under severe financial stress due to high debt and deficit levels.

“About 60 per cent of low-income countries are already in debt distress or at high risk of it.

“I participated virtually in our April 13 conference on debt transparency and sustainability and suggested steps to improve the implementation of the Common Framework.

“These included establishing a timeline for forming creditors’ committees and suspension of debt service payments and penalty interest.

“Others are expanding eligibility: a simple rule so that it can be evaluated and enforced and engaging commercial creditors at the beginning of the process,” Malpass said.

On inflation problem, he said it was causing immense strain.

Malpass, however, said that policies need to be adjusted to enhance supply, not just increasing demand.

“Markets are forward looking so it is 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.

“Central banks need to use more tools under current policies. The inequality gap has widened materially, with wealth and income concentrating in narrow segments of the global population.

“Central banks can 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.

Malpass listed some of the tools to include changing the duration of their portfolio, encouraging supply through their regulatory policies and providing forward guidance that fosters currency stability.