A Conversation With David Malpass

Tuesday, March 21, 2023

President, World Bank Group


Chief Executive Officer, MCC Productions; CFR Member

World Bank President David Malpass discusses the overlapping challenges facing developing countries and opportunities for action.

CARUSO-CABRERA: Hi, everyone. Good to see you here. Wow. And good to see everybody online as well.

Here with David Malpass, head of the World Bank. I’m Michelle Caruso-Cabrera, CEO of MCC Productions and interviewed David many, many times when he was the chief economist at a major Wall Street firm and I was at CNBC. Good to see you again.

MALPASS: Very good to see you, Michelle.

CARUSO-CABRERA: So you run a bank.


CARUSO-CABRERA: We’re in a banking crisis.

MALPASS: That’s true.

CARUSO-CABRERA: You know, what do you think? (Laughter.)

MALPASS: It is—(laughs)—it is a crisis. Thankfully, though, World Bank is not exposed either to Silicon Valley Bank or really to the interest-rate risk that is in the economy. We’re a floating-rate lender, and so—and we don’t have a maturity mismatch. And further, we do a full mark-to-market of our—of our investment book. We don’t have hold-to-maturity assets. So from the bank standpoint, we’re OK.

From our borrowers’ standpoint, you know, developing countries are really under a lot of strain now. People in poorer countries are really feeling the brunt. There’s not enough capital, not enough fertilizer. Food is in shortage for millions of people, hundreds of millions.

CARUSO-CABRERA: Is that because of the banking crisis? No, that was happening before the banking crisis, because of rising interest rates.

MALPASS: Happening before. That’s right. But this will make it worse.

CARUSO-CABRERA: Because of lack of credit.

MALPASS: Because there’s, you know, a re-estimate by the world of the interest-rate risk that has been on people’s books. You know, you have to go back. The world was at—the advanced economies were at zero percent interest rates for a long time, and so that allows a buildup of misallocation of capital. It was going into things that made sense when interest rates are zero. So now you say interest rates are going to be 5 percent, normal—a more normal interest rate, and the whole world has to reevaluate their asset prices. And so that leaves a lot of poorer countries in the lurch.

CARUSO-CABRERA: Explain that. How—why is that? How does that happen?

MALPASS: If I say interest rates are zero and bond yields are 1 ½ percent or 2 percent, then in normal finance terms I can put a price on assets relative to that. The price of a bond varies with the yield on the bond, so if the yield is held down that means the price is high. So now I’m going to raise interest rates. The price of bonds goes down, but really in some way there’s fungibility of assets worldwide. So the price of real estate has to be examined, a bitcoin has to be examined, and so on around the world of assets. So in developing countries, that means investors are evaluating their positions there, and that means even locals in countries—they’ve been operating in their country with the idea of a certain set of interest rates, and now they’re going to be higher. So it makes it hard to invest in that environment. That’s what we see in the data.

CARUSO-CABRERA: There’s a simple way to think about it. When I see the—well, the two-year yield got to nearly 5 percent at one point, right, or it was around 5 percent. So every single other investment in the world had to yield 5 percent more, basically, right? And so you’re willing to invest in a country with a risky credit profile at X when you can’t get very much because everything’s yielding zero, but once you can get 5 percent someplace that’s very safe you’re far less likely to invest.

MALPASS: Exactly right. So eurobond yields for a poorer country went from 7 (percent) to 12 (percent) or 7 (percent) to 14 (percent). And the countries explain, look, why did they go up more in my country when they were already too high to start with? Well, that’s the way world financial markets are working, and it’s a giant strain on those countries.

So that leads to the bigger issue of we all—we all live on the same planet. How are we going to have a workable environment in the world when there’s a lot of population growth in poorer countries that capital is not going in, the new investment is not there, even the education systems are not generating as much literacy and numeracy? And so how is that going to balance out? That’s the kind of tensions that the World Bank is trying work in.

CARUSO-CABRERA: So was it a mistake to keep interest rates as low as they were for as long as they were?

MALPASS: I think they were artificial, and so then you have consequences. So a mistake, OK. I think they should not have been kept so low for so long. And we have to recognize that that caused capital to go—to be concentrated in rich people, in asset holders. You’re literally saying that the government’s going to issue a lot of bonds, the central bank’s going to buy a lot of bonds, and so that favors bond issuers. Big corporations, and governments were favored in that environment.

CARUSO-CABRERA: But the World Bank’s job is to lend to poor countries.

MALPASS: That’s right.

CARUSO-CABRERA: And you’re still doing that.

MALPASS: We are still doing that. In fact, we’ve really ramped up. So we lent some 70 billion (dollars) from the bank side, IFC, and another maybe $20 billion—so this is money that’s lent and invested. And a big—some chunk of it is grants, outright grants, or very, very low interest rate loans. So it gives true benefit to the poor, to poorer countries. And that’s really the goal, to find the best projects in countries to try to support good directions and to support the people.

When I came into the World Bank, I said my goal was to try to have a system where we could get good outcomes for people in poorer countries; not just—not for the governments, but for the—for people in poorer countries. That means social safety nets, that means trade and trade facilitation so they can swap their goods, and so on down the list: education, food services, adaptation to climate change. The climate costs are huge for the—for people in these countries.

CARUSO-CABRERA: So right now it’s in everybody’s consciousness the size of banks because we’ve been hearing about SVB, how, you know, they had more than $200 billion in terms of their—what’s the—what’s the balance sheet of the World Bank?

MALPASS: Yeah. In total, so it’s $640 billion. That’s a combination of loans to more creditworthy countries, but then also loans to less creditworthy countries. And so if you did a pure mark-to-market, it would be less than that. That’s the book value of the loans. And we—

CARUSO-CABRERA: And how often are you lending it out? Like, what’s your leverage ratio?

MALPASS: So it’s a five-times ratio. So our equity capital for the IBRD at the bank has some $55 billion. And we leverage that five-to-one, which is the highest among multilateral banks. That’s because our portfolio is really diversified. When you diversify, you lower the risk and you can—you can lend more against that. Then, also, part of those assets are supported by grants.

So the World Bank is financed by multiple sources. One is we—the shareholders, so that’s equity capital. Then we borrow against that. So we issue some $80 billion or so per year of bonds into bond markets at basically rates that are roughly like the U.S. Treasury or even below. And so—and then the—a third and very important source is the annual grants by the advanced economies. So that’s a generosity of taxpayers. It’s roughly $23 billion that was pledged over a three-year period in 2021.

So during my time at the bank we’ve had two major funding drives for IDA. That’s our—that’s our trust fund for the seventy-five poorest countries. So we concluded one in 2020 and then on an accelerated basis one in 2022. So we’re giving away and lending the money that was raised through—during COVID. And we’re proud of that, $93 billion of financing available from that fund.

So one of the things I emphasize to governments is the World Bank is a—is a successful non-fragmented lender, meaning into one fund you can be funding many of your goals in the poorer countries, whether it’s child nutrition—we have big anti-stunting programs. You know, in the world there’s still way too many children that grow up with insufficient nutrition, and so they don’t grow to their full stature. So that’s a goal. Education, of course, a major goal. Health and pandemic preparedness.

CARUSO-CABRERA: That was going to be my next question.


CARUSO-CABRERA: Give me an example of some of the things that you fund, a project in an example country.

MALPASS: So that—just schools, and either building schools or hiring teachers/training teachers is one. On nutrition, we work with both farmers and with actual cash-transfer programs.

So one need for the world is a social safety net. So if the country is really in desperate straits, we have actual ways to get money to people either in loading a debit card. Even nowadays with digitalization you can provide actual cash transfers or cash availability to women in poorer countries. In the past, there was no way to get money to women, and women are the best spot to put money because they take care of the children. They take care of the household better, frankly, than men. But there was no way because the men or the community would take it away. So now, if the woman has the card, she has the ability to get food, feed family, and maybe pay education transport for a girl that otherwise wouldn’t have education.

I’m not calming these are—these are solving the problem. We should just recognize that around the developing world there are huge numbers of people without electricity, girls that are not in school, and you know, at age ten they leave school, and then they are—they marry at a young age and have more children. And so one of the goals is to have—or, a huge goal and an important one is to keep girls in school as long as possible because that makes them—that prepares them for a future life.

CARUSO-CABRERA: You mentioned climate change. I want to get to that in one second because we have this important report that came out which sounds very dire.

But first, one of your major goals, remember when you first became president of the World Bank, was China was considered a developing country and was getting World Bank loans. Has that changed under your leadership? What is the relationship with the World Bank and China now?

MALPASS: We have, under my leadership, evolved the relationship with China. So what that meant, in the 2018 capital increase for the World Bank there was an agreement among shareholders to reduce the lending to China. It’s still—we are still lending, but what we’re doing is lending for global public goods activity in China.

CARUSO-CABRERA: What does that mean?

MALPASS: That means marine plastic reduction. China has emitted a lot of marine—of plastic waste through rivers into oceans, and it’s beneficial to the world to reduce that. Plus, they want to do that. That cleans up rivers. And we’ve—the World Bank’s historically been very involved in China in solid waste and sewage treatment, so this is a continuation of that program into marine plastic. We also do greenhouse-gas emission reduction. So that’s coal-fired power plants and helping China find ways to transition that to less carbon-intensive fuel sources. So we this year will have done three loans to China, so that’s what we’re talking about.

Separately, China’s a major—China is a—you know, and complicating the story, China is repaying loans from the past. So that is one of the sources of funding of the World Bank. And also, China is a contributor, donations to IDA, the fund I was talking about, and they’ve substantially increased that during my presidency from 600 million (dollars) for a three-year period in IDA ’19 to now they’re at, I think, $1.4 billion that they give in cash to the World Bank for participation around the world. So that’s good. That’s not as much as the size of their economy might indicate, so they could do more.

We also work with them almost daily on the debt—on the debt challenges. They’ve lent—they’ve become one of the world’s major lenders to developing countries, and so we’re in the process of trying to work with them to do debt restructurings. They haven’t been in the habit of doing that.

CARUSO-CABRERA: Yeah. If people are unaware, you know, everybody sits down when a country gets in trouble, like Sri Lanka which just got the IMF deal—everybody in theory sits down at the table and says this is what everybody is owed, and then you come up with a sustainable debt plan. But sometimes China won’t tell you what they’re owed, and so it’s very difficult. They don’t want to help out at the Paris Club, either. Are they coming along at all? Do they want to be part of that solution, or not?

MALPASS: So a major push that I had at the U.S. Treasury and now at the World Bank is transparency in lending. So if you can see what the—what the amounts are, then the people of the countries have more relationship with those loans. If they’re under nondisclosure clauses, which China has been in the habit of doing—meaning as you sign the contract it says no one can disclose with the terms of the contract are—that makes it hard for the world to evaluate those contracts.

So we’re—we have dialogue with China. We’re making some progress. In Sri Lanka, China has participated in the—in the IMF program that was just done this week, which is important and will help Sri Lanka perhaps pull out of their crisis. We’re also looking for more participation from China.

But also—and I really should just say very quickly—private-sector creditors have also been a major factor in this debt burden. That’s through eurobonds, for example, that are generated from London and from New York primarily. And so these are—this was made possible by this interest rate—the low interest rate environment caused reach for yield, so that meant investors would try to put money into bonds that were going into poorer countries. And the challenge, then, is if the money wasn’t well used, how are you going to repay it? And that’s the restructurings that we’re looking to proceed with.

In Ethiopia, they borrowed from the eurobond market. And so they’re a poor country with lots of needs, and there needs to be a restructuring or rescheduling process.

This goes back—and I don’t know how much deep interest people have—but there’s not a bankruptcy process for countries. You know, in a corporate environment, if you make a mistake there is a—there is a way that a court comes in and says here’s the allocation of the losses. For developing countries, there’s not an equivalent.

So they’re stuck. Once the contract is signed, it’s enforced globally, and so that makes it very difficult. We’re trying to—and I’ve personally and with the World Bank, we are trying to accelerate the process so that countries can get to a sustainable spot in their debt structure. And that’s going on daily in countries, especially as interest rates rise.

And may I say, you know, the world’s in a spot right now where there’s—much of the capital of the world is going to be absorbed just in paying the national debts of the advanced economies. These are huge burdens on the global economy. And so that will absorb capital and the central banks themselves are absorbing capital. So there’s not enough left for developing countries.

World Bank is in a process of looking for more resources of our own internally. We’re increasing our leverage ratio. You mentioned the leverage ratio. So we’re in the process of raising that some, and that’s going to allow us—

CARUSO-CABRERA: You mentioned around five. The average—I call it the Jimmy Stewart Bank—is ten.

MALPASS: Is ten.


MALPASS: But Jimmy Stewart Bank was not lending to developing countries, so—

CARUSO-CABRERA: No, of course, so you’re going to—

MALPASS: The bank is at a—at a—more leveraged than any of the other multilateral developing banks and also is at a—at a limit with regard to the rating agencies. So as I mentioned, we issue a ton—a lot of bonds. We issue weekly—so just in the—well, I don’t know current numbers. In the first few weeks of 2023, when the—remember bond yields went down some? We were able to issue $14 billion into that space, well-received by markets.

CARUSO-CABRERA: What rate did you get?

MALPASS: We got, for a eurobond offering, 2.5 (percent) at that time.

CARUSO-CABRERA: Pretty good.

MALPASS: And that was on a—on a long term—so fifteen- and twenty-year bonds at 2.5 (percent) that gets locked in. So this is a—this is a successful issuer, and so you have to watch your leverage ratio. But we’re increasing that. We’ve had discussions with the board, and we’ll be announcing and completing that process. That gives us 40 billion (dollars) more to lend over the ten—over this ten-year period.

So we do a ten-year rolling capital adequacy process, and so it creates more headroom within our lending. And so we will begin lending that starting in July.

CARUSO-CABRERA: You’re stepping down before your term ends. If people were to read the New York Times, for example, they would think that maybe you were—


CARUSO-CABRERA: —stepping down early because of climate skepticism, because you haven’t done enough on climate. What would—what would you say to people who think that?

MALPASS: Not true, but I—so, you know, when you put together my U.S.—this has been a very busy period in my life, two years in the U.S. government and then four years at the World Bank, and so it’s a good time for me personally and also a good time for the bank. For one, we’re coming to the end of our fiscal year, so that’s a period where the bank is very active. So right now, this week, next week, the following week the bank is really active on all cylinders. We’re preparing the budget for next year. We just issued and discussed with our board Paris alignment, which is an important part and a commitment that I made of—that’s related to the Paris agreement. We’re doing the debt work that I talked about there and a range of activities, plus cranking out a lot of loans. And I’ve really put a lot of emphasis on the quality of loans. So it’s not just the quantity, but you want to have loans going that will have an impact—a positive impact within countries.

Very important in this is the country is going to repay the loan. The World Bank has a very good track record of countries repaying loans. So as you make the loan, there’s a responsibility to make it in a responsible way, and we’re trying to do that to the best of our ability.

We’ve also been heavily involved in disasters as they occur, whether that’s the Turkey earthquake where World Bank was very quickly on the ground—in Beirut when the explosion occurred the World Bank office was hit hard, but people were working really the next day with a damage assessment and then with the relationship with the government to try to begin. Now, Lebanon, you know, continued to be in disarray, so that’s been difficult.

CARUSO-CABRERA: Problematic, yeah.

MALPASS: But in Turkey, we’ve been successful in providing aid. And in Ukraine, we’ve disbursed during—in the first year of the war $20 billion to Ukraine. So that’s a sizeable chunk.

CARUSO-CABRERA: Part of the spirit of the question, too, though, was about climate skepticism. What would you say to folks about that?

MALPASS: So it’s very clear that people are contributing to global climate change, and the World Bank is extremely active in this. In my period—in my four years—long, very busy four years—we’ve doubled our climate spending. We’re the biggest international financial institution in climate. In fact, we do more than all the others combined. So you put together IMF and IDB and the Asian Development Bank and so on, the World Bank is doing more than all the rest combined.

So it’s a big lift. It is a bank-wide effort. We over the last year have put together and published we call them CCDR reports, country climate development reports, that identify in developing countries what the best pathway forward may be for them to deal with climate costs. That means adaptation and that means reduction in greenhouse gas emissions. So we’re moving forward actively on that.

And we’re at a good point, as I say, for me and for the bank on the transition. So one of the things I’ve set out to do is have a very smoother than usual transition for the presidency of the bank, and that seems to be going really well.

CARUSO-CABRERA: What more—what role do you see beyond what you just mentioned with Ukraine—Council on Foreign Relations just hosted a whole discussion on financing Ukraine’s reconstruction. Of course, that has to happen post-war. How is the World Bank thinking about that?

MALPASS: We’re in the middle of that. The World Bank does the official damage assessment. We’re coming out with a new—an update on that this week. So it will show the impact—you know, what Russia’s been doing is targeting infrastructure within Ukraine. So you add up what it’s going to take both from the direct damage, the direct hit, and then how do you rebuild that into the future. We work and help lead the efforts with European donors, with the U.S. donors in each aspect of the—we’re not involved in the military side, but in the support for public-sector workers as well as the immediate fixing that’s going on of the grid in Ukraine. The generators and the electricity efforts are an active World Bank set of projects.

So if you say how do you reconstruct, so we—there are big teams working on that that divide it into various avenues. Meaning there’s the rail infrastructure. There’s the road infrastructure. There’s the electrical infrastructure, grids. All of those are being planned for and then the funding sources identified.

A difficulty is the war is still going on.



CARUSO-CABRERA: So one of the things that came up a lot on the CFR event about post-war reconstruction is will there be enough transparency. Before the invasion, there were concerns about Ukraine expressed by the IMF, et cetera. You feel any progress is being made there? Is that something that could be a hurdle? Is that something the World Bank thinks about?

MALPASS: I went in 2019, I met with President Zelensky. I did an article in the Financial Times on what the reforms were that we were—that we were encouraging. That included, for example, unbundling their energy companies because they’d been—they were—they were integrated and it made it very non-transparent what they were doing. We also are—were very active—this is back to 2019—both before that, from 2016 onward, through the invasion in the—in the agriculture sector, the land-reform sector, and the banking reforms, all critical to transparency. So I think those are legitimate challenges. We face those worldwide in trying to have rule of law that will allow private-sector investment into a country. And so we are working closely with the Ukrainian government on ways to do that.

I will chair—I regularly chair the meeting with the prime minister of Ukraine and the finance minister. We’ll have another meeting in April where that will be one of the topics of discussion, how do you achieve transparency, especially if you’re rebuilding during a war. And that has to do with the systems that you’re using, whether it’s computer systems, verification systems, and how you’re choosing how to spend the money.

CARUSO-CABRERA: All right. So it’s time for questions from the audience. At this time, I’d like to invite members to join the conversation. A reminder: This is on the record, by the way.

And we’re going to take our first question here in New York. Go ahead, right here.

MALPASS: Very nice to see friends here.

CARUSO-CABRERA: Oh, and let’s get you the microphone here. And don’t forget we’re also going to be taking questions from our Zoom viewers as well. Introduce yourself, please.

Q: Michael Skol, Skol & Serna.

Mr. Malpass, can you tell us a little bit more about what the World Bank is doing about corruption around the world? Corruption is increasing around the world. Is the World Bank actively trying to reverse the trend?

MALPASS: Thank you, Michael. So we worked together at the State Department in the 1980s or ’90s.

CARUSO-CABRERA: I could tell you were buds.

MALPASS: Very nice to see you.

We do actively work on corruption. We have a group of people working on corruption. I spoke recently at the Transparency Forum in D.C., a giant group of people, Transparency International, focused on how do you do this.

And so as you think about transparency itself, that means which ministers are authorized to sign contracts. So we work in the details of how do you set up a government system that in some way helps avoid the corruption that comes from money flowing through governments. And that also has—we work actively with court systems to try to have enough judges and have them trained, so the practical aspects of what do you to try to stop corruption.

Now, as you know, the practical challenge around the world is when a contract is entered into, if it’s not very transparent then money may flow on the sidelines of those contracts, and that still is a major problem for the world.

One other that I’ll mention—I don’t know if it’s one—you know, the U.S. has the Foreign Corrupt Practices Act that makes it a criminal penalty as Americans are involved or accused or alleged to be involved in bribery abroad, which puts an extra burden on Americans as they try to work in foreign countries. So one of the problems the world faces is there—that people that are nationals of other countries have an inside track in getting contracts or in working with suppliers in those countries, because they have—there are international standards, OECD standards, that aren’t—that aren’t—that allow more activity by non-U.S. foreign nationals. So this is a real challenge for the U.S., that U.S. businesspeople are not as engaged abroad as other countries are doing. And so that means our values and our systems are not as present in foreign countries.

CARUSO-CABRERA: You talked about this a little bit before we came on, when, for example, there’s a book out, Cobalt Red, which is all about how it is that we get cobalt. And it’s pretty clear that it’s a very horrific process. So do you lend to a country like that, or do you not? And if you don’t, who does?

MALPASS: Well, this is a huge challenge for international organizations. You want to help people, but you recognize that there are practices that you abhor. It may be child labor in countries or bias against women, against girls, against people that are different. And so what we do as a practical matter is, in those countries, lend less of vast dispersing money to the governments, and more on projects that will pay out over a period of years based on results. So we have an instrument called P4R, Pay For Results, which allows you to say: OK, I’m paying you as more girls go to school.

And so there may be corruption in the country, there may be things that you don’t like at all, because in many parts of the world there are a lot of things that—practices that we don’t like. So you want to find a way that you can still help people on a daily basis. That might be cash transfers that I was mentioning before. That might be help to farmers so that they have enough fertilizer to plant rather than balance of payment support to the governments, which you may not want to do. And there are several large countries, I won’t go through and name them all, where we’re not doing balance of payment support because of the practices of the governments.

CARUSO-CABRERA: We’ll take a Zoom question.

OPERATOR: We’ll take our next question from Tara Hariharan.

Q: Thank you so much. My name is Tara Hariharan. I work for NWI, a hedge fund here in New York.

Mr. Malpass, I’d like to return to the subject of debt relief for distressed emerging markets. Could you enlighten us more on the discussions that are taking place around the India G-20 presidency, and whether anything can come out of this? And, secondly, do you think there is any prospect at any point in the future of the multilaterals, the World Bank included, actually also providing debt relief in the form of haircuts in the way that China has suggested it would require in order to be part of this process? Thank you.

MALPASS: Yeah. Thanks. Good question. So, for background for people, I proposed—and Kristalina and I proposed us hosting a roundtable in order to try to push forward the debt restructuring. So we are co-chairing with the G-20 presidency. This year, that’s India. So Finance Minister Sitharaman, Kristalina, and I joined in India three weeks ago, or so, for a roundtable discussion. My goal in this is to have debtors involved, all of the

creditors involved, the various—that means private sector creditors, various government creditors involved, and also the—I’ll say again—the debtor country.

Past practice has often been where a few creditors would get together without the debtor country and decide what the fate was going to be of the restructuring. So what we’re trying to do is have a more inclusive process that gets us quicker to an endpoint. So that was that roundtable. And then we’ll have another one, I think it’s April 12th, on the sidelines of the World Bank-IMF annual meeting in D.C. So we have invited debtors, creditors, and finance ministers of the major creditors to sit around a table and talk about what we’re going to do to accelerate the process. We’re strongly encouraging more transparency within the process and getting to an end point.

So that will be—and so now there is preparatory work going on this week, next week, leading into that, where there’s discussion of what steps can be done to share the burden, comparability of treatment, within a debt restructuring? So these are common concepts in a bankruptcy process, but there isn’t the equivalent that operates on an international sphere. So instilling some of that into the process will make it go faster. That means all the creditors share on a net present value basis in an equal way.

Now, the questioner then said, well, what about the World Bank? You’re a big creditor to the countries. The World Bank is participating in the debt restructuring for the countries by doing concessional lending into the countries. So there—if we are putting in grants, as we often are doing, or forty-year loans to a country that has zero percent interest rate, that needs to be evaluated as very helpful to the creditors who are taking out money as they go through a restructuring process.

CARUSO-CABRERA: So you’re arguing you shouldn’t take as big a haircut, because you’ve done all that other stuff?

MALPASS: There’s not a mechanism for the multilateral developments banks, nor for the IMF, to take a haircut on their participation. It was done once in the 1990s. It took fifteen years to negotiate how they could actually take a loss. It was made up for by the shareholders. Incidentally the U.S., I’ll put in a nudge, is in arrears on that. So it—that process occurred in the 1990s into the early 2000s. It’s still being carried out for—I participated and led the Sudan debt restructuring that occurred two or three years ago. We’re working—and Somalia has been able to do it. But the U.S. is in arrears on its contribution to that, which—and that’s been accumulating for fifteen years.

As China proposed as well, let’s do that again, it’s not really a viable option. And we’ve explained very clearly that China gets huge benefit if these restructurings can occur, because it’s so active in international markets. So we’re trying to appeal to the point that this is good for everybody if you can work out a process. And there’s not a mechanism for the World Bank to participate, or for the international financial institution. No mechanism for that. It would slow down the process.

So let’s just get to a debt restructuring. This applies very currently to Zambia, a country that has for two years been asking the world community to restructure their debt so that it’s sustainable, after a period of previous governments building up a lot of debt. And so one of the creditors is China, but others are private-sector creditors. And they really need to step up and say: Look, we’re ready to go ahead with a restructuring for Zambia. That basically involves reading an MOU and agreeing that all the creditors share. And meanwhile, the World Bank is putting in giant new money. We have been for two years, helping support the country as it waits for the international community. So I’m really urging the international community to move forward with it, and get it done.

CARUSO-CABRERA: Do you want to bring the mic over here to this gentleman? Here you go. I didn’t know there were two mics in the room.

Q: Ramakrishna from the Woods Hole Oceanographic Institution. Thank you very much for your comments.

This is more a reflective question. Since the time of Bob McNamara as the president of the World Bank, World Bank has increased its attention to environmental issues. And you pointed out about the lending by, in your term, for climate change. And yet, every time we have a new international agreement on environment, the demand is for creating a fund outside of World Bank, and not as part of it. And so we have a proliferation of these funds. The question is, is it because of some trust deficit in terms of the World Bank and its ability to help developing countries? Or, you know, what do you see happening in the future? Thank you.

MALPASS: Yeah. Thanks. You know, the World has a tendency to set up trust funds so politicians say I’m setting up a trust fund. And then when you look at it, it doesn’t actually have much money in it and it doesn’t disperse much. And there are a lot of instances of that. So as I look at this—and I’ve been involved in this literally since 1984, directly with the World Bank and with trust fund issues—I think it makes sense for the world to give responsibility to the World Bank and other multilateral development banks, and not have such fragmentation of the aid.

Because how many trust funds do you really want to be doing education in primary schools? Well, there are hundreds of those. And I’m in favor of lots of diversification of people’s resources, but there is some overhead. And so what we’ve tried to do, and I initiated this at the bank, is we manage eight hundred trust funds inside the World Bank. And so I tried to have those grouped into umbrella trust funds that will be more efficient from that standpoint. So climate is a case in point. We have many inside the World Bank. And donors do put money into those.

But we encourage also there to be a recognition that there’s overhead costs when you set up individual ones. And isn’t it pretty clear what your goal is? Greenhouse gas emission reduction, for example? And I’ve proposed and I’ve proposed and I presented at Sharm El-Sheikh a single unified trust fund at the World Bank that donors could put money into if they wanted to do was reduce greenhouse gas emissions. You know, the world is facing this giant problem. The carbon dioxide greenhouse gas emissions are going up, not down. And so as the discussions proceed, I think effectiveness is going to be part of the challenge.

And so we’ve—you know, we have—fund IDA itself, the fund for the poorest countries, which is a very large part of the world effort that goes to poorer countries. Does 75 percent of the adaptation financing that’s being done. That means helping people move away from coastal areas, from flooding areas. That means helping farmers respond and adjust to higher temperatures, meaning seeds that work better in higher temperature environments. That’s already embedded in IDA. And then for IBRD, we’ve proposed a trust fund—a unified trust fund that would actually have an impact, make loans.

You know, there’s lots of conversation around the world of people saying that there needs to be more resources. Agreed. And that the World Bank’s not doing enough. I disagree on that front. The World Bank’s really stepped up and done a lot, and we’re rapidly in the process of expanding—of expanding that. So, you know, I think there needs to—I’m glad you phrased the question. Do some introspection. So my observation from forty years of doing this is that there needs to be focus on the trust funds—of the various trust funds that the world wants to set up so that they’re non-fragmented.

We have some countries—and we keep a lot of data on this—some countries, poor countries, that are interacting with fifty different development agencies. And so think of the capacity constraint on a government that is really under maybe a physical attack from, you know, the—in some parts of the world, there is the actual arms flow that is causing violence. So the government is then asked to have meetings with fifty different agencies as they make their contributions. So that, I think, can be—can benefit from some centralization of the processes.

CARUSO-CABRERA: We’ll take an online question.

OPERATOR: We’ll take our next question from Sheri Fink

Q: Hi. Thank you for taking my question. I wanted to turn to the pandemic, and ask you how did the World Bank come to host The Pandemic Fund? And what do you hope that it can realistically achieve, given its, according to the current website, $525 million current fund balance?

MALPASS: Yeah. I’m jotting notes because I do know these stats. So The Pandemic Fund came about—the World Bank, we were very involved in the COVID response, and that’s the vaccine response. We were effective at that. You know, the world faced giant challenges. We were able to quickly put together a new type of lending by the World Bank, this is in April and May of 2020, which was called an MPA. We have to have acronyms. And that meant that there could be fast aid to small countries. We recognized what we needed to be able to do was, working with our board, get a preapproval of a concept for minimal aid—and this is PPE, personal protective equipment, that could be—that could be generated.

And you can’t take every loan to the board. So the board approved a blanket lending. And we were able over the next year to do $10 billion of lending, oftentimes in relatively small loans, 100 million (dollars). We even did in Iran, which—where we don’t lend—but we did a $50 million COVID—remember, Iran was hit hard by COVID. They didn’t have good vaccines. They had been a destination spot for flights from China, and other reasons they were hit hard. And WHO had a way to work in hospitals. And so we funded that. And we did it all quickly. And so the world then thought about, how do we prepare for the next pandemic?

And, with shareholders encouraging it, the World Bank quickly set up a trust fund, one of these. And the world kind of centered on it. It was a discussion at G-20 meetings. And so we have a trust fund. And I have statistics that I just heard today. We, by moving quickly, have gone out for—so the trust fund will fund projects through MDBs in developing countries to prepare for pandemics. So that might be in the form of surveillance, for example, where you need to have people in rural areas watching for odd diseases that show up. That’s how you head off a pandemic.

And so we went out for the first request for proposals about a month ago, or three weeks ago. We have received from one hundred different countries 650 requests for projects, with totals—with amounts totally $7 billion. That’s written explanations of what the project would do. And the caller I think gave—I didn’t know this number of how much is currently in The Pandemic Fund, largely from the U.S. So we’ve enjoyed and welcomed strong support from the U.S. during my period, both from the Trump administration and from the Biden administration. And so they’ve been a major funder of The Pandemic Fund.

But it’s not nearly enough. We need ten times as much in that fund as what’s in there now. And I will call today on donor countries to put more into the pandemic fund, because we already have clear expressions of how that money would be used. So that means an unusually fast and vibrant response from the world, straight into the World Bank, to say: I need funds to set up a laboratory here in order to test pathogens, or whatever it might be.

As a historical note, this podium, in 2005 I was here as a panelist for the—for the SARS debate, which was at that time a super scary pandemic. And people were worried about the immediate effect, but I made a point at that that we don’t know what the impact of that pandemic will be, but over the next ten years there will be pandemics. So preparation, I think, is really important. And we’re trying to do that now.

CARUSO-CABRERA: Question back there.

Q: Thank you. Adam Flatto, Georgetown Company.

Are you concerned about the banking contagion spreading to emerging markets? And if so, how can the World Bank respond to that?

MALPASS: Yeah. Thanks. So contagion is a word financial markets use. I remember the contagion of 1998, if people remember that. So there was the devaluation of prices in Asia, where—

CARUSO-CABRERA: Was that the Thai baht?

MALPASS: Thai baht devalued, and then the Indonesian, and then the Malaysian currencies. And there was contagion that took the following form: Investors who owned assets in Thailand were hurt. So they sold the exposure that they had, let’s say, in Indonesia, but by the end of it they were selling Brazil and Russia heavily in 1998. So that was a form of contagion that went through the asset managers, because they had similar exposure. So that was back way in.

If we think about who was invested or hurt by Silicon Valley Bank, that particular—those were either depositors worried about their deposits, or investors in the equity banks in the advanced economies, whether in Switzerland or in the U.S. And I don’t think those are the same investors that are investing in a lot of the emerging markets. Also, we nowadays have much more bond ownership. Oftentimes in the past, contagion has occurred through bank loans that were into various investors. With bond investors, they have more ability, maybe, to evaluate the risk.

So I don’t—I’m not thinking so much there’ll be financial market contagion, because the banks in emerging—developing countries, by and large, are not looking at the maturity mismatch that’s occurring in these—in the advanced economies. There’s not that many, or at least I’ll guess—probably wrong, but try to make the point—there’s not that many situations where they’re borrowing short to lend long. You know, the biggest one of those in the world is the Federal Reserve and the other major central banks. They borrow overnight money and put it into bonds. So as interest rates go up, that shows up as a loss on their books. That’s not the standard pattern for banks in emerging markets.

CARUSO-CABRERA: But isn’t emerging markets going to struggle enough as interest rates are going up?


CARUSO-CABRERA: I mean, that’s where the contagion—

MALPASS: So I would say it will be economic pressure and stress, which was already intense and now is intensifying further. They’ve been hurt by the interest rates going up, but also by the prices for food and fertilizer going up. These are—so we should be introspective a little bit. Think of the—think of the challenge for a farmer in a poorer country. The fertilizer is a bigger percentage of his or her disposable income than in the advanced economies. So what’s happening literally in the world right now is fertilizer is going to farmers that can afford it. So that means farmers that are on the poorer end of the scale are under-fertilizing. That hurts their soil.

And it also means the people in those countries—we already have data showing this very concerning trend—that the land is being under-fertilized. So next year it won’t be—the yields will be lower. But already, the protein content of the food being grown is going down, which means that the nutrition for people—so even though—the nutrition for people is being diminished. And so even though you don’t see it directly, I mean, we are beginning to see it in the famine numbers and in the hunger numbers. It’s also in—if we look into next year and the following year, it’s a grave concern.

So how do you handle that? You try to get fertilizer to be distributed more broadly in the world. That becomes a very real challenge. But if you always allocate based on who can afford it, then you’re going to end up with the advanced economies—the concentration of wealth goes to the people in advanced economies.

CARUSO-CABRERA: Question online.

OPERATOR: We can take our next question from Hani Findakly.

Q: Thank you very much. And thank you, Sir Malpass, for this very good—very good discussion.

The question of climate change came up in the conversation you had with the moderator and other questions. Since this is a conversation on the record, you have a chance to clarify exactly how you feel personally about climate change, apart from what the World Bank is doing.

MALPASS: Thanks. I’ve done this numerous times. So I do think people are contributing to global warming through their emission of carbon dioxide. And so as we think of what the World Bank can do with that, it’s have data and generate more data, have more projects. And one of the lacks in the world, and a frustration for me in discussing the topic, is people who are not doing projects to actually reduce greenhouse gas emissions are then saying, you’re not doing enough to do that.

So the World Bank is actively seeking and promoting and carrying out projects that reduce greenhouse gas emissions. And I challenge and really invite the world to step up and do that. As we think about the funding that’s going into that effort, these are hard projects. They have to be carried out. And let me go through that, if I can. In order to convert—to stop a coal-fired power plant, you have to be thinking about the coal supply line, all the workers that are involved in producing coal. Who right now are often selling their coal—you know, across the developing world, people are selling their coal to the advanced economies to be burned in coal-fired power plants in the advanced economies. Big challenge.

But as you think about what’s going on in the developing countries, which is our focus, moving people away from carbon-intensive activities takes a period of time and a project funding. And so we put in—in South Africa, for example, we have a project where you put in a combination of trust funds, of concessional funds, and World Bank loans to the government of South Africa, in return for them reducing their greenhouse gas emission reduction. So we’re one of the only organizations in the world actually doing that, and we invite others to join in.

CARUSO-CABRERA: Last question. This lady had her hand up. Yes.

Q: Maryum Saifee. I’m with the State Department, a Foreign Service officer.

My question is on what is the World Bank doing around advancing cyber resilience and bridging digital divides?

MALPASS: And what? Digital?

Q: And bridging digital divides. Like, using technology—

CARUSO-CABRERA: Bridging digital divides.

MALPASS: Yes. Thank you. I didn’t—I couldn’t hear very well.

So this—I’m really glad this came up. As you think about the technology change that affects lives of people in the poorest countries, oddly enough, I mean, of what’s going on in the world affects them, but cellphones really affect them. And if their country has the ability to have cellphones, that changes lives because the connectivity problem, that’s such an immense problem—lack of roads, lack of electricity grids, and so on—begins to be bridged by information. Farmers in India know what the farmer in Pakistan is planting, and so they can adjust and get a better output because they know what their neighbors are doing.

So digital divide is huge. The bank is—the World Bank is—we have active programs in, I don’t know how many, fifty countries promoting. I was just in Panama and Dominican Republic. Those are small countries, but very important because they have private sectors that are trying to grow. They’re actually sustaining better than some other countries. And one of the things making it possible is active digital. And we’re very involved in supporting either banks that are putting in digital systems, or government systems that are improving that. We also, from the digital divide standpoint, work actively into rural areas to either provide phones. You know, a 2G

and a 3G cellphone that wouldn’t be used in the U.S. is actually really valuable in lots of parts of the world, and can be given away free. Technology is making possible much lower-cost digital transaction.

So I’ve advocated changing the—or, broadening the United Nations SDG, Sustainable Development Goal, related to financial inclusion—broadening it beyond bank accounts into digital access. Which is happening. And the world is going along with that. And so, in other words, you don’t have—or, bank accounts turned out to be quite expensive. People would open them, use them once to get maybe the starter fee, the seed money that’s in them, and then never use the account again. Whereas digital transactions they use, you know, in some countries we’re seeing literally billions of transactions per year, because they’re very small transactions, store up value, but more important store of turnover. Buying and selling all day long in small transactions is enabled by this.

So we actively—so, for example, in Senegal we’ve actively worked to break the monopoly on the undersea cable and get more licenses into Senegal. And that has enabled the payment system that took over from—the previous supplier of payment systems would charge, like, a dollar a transaction, or even more—$2 a transaction. The new provider came in, that we helped fund, is doing it where you don’t pay for the—you don’t have a load on the transaction. Took the market by storm. Really lowers the cost of transactions. And so that’s enabling. And Senegal is doing better than some of its neighbors because of that.

CARUSO-CABRERA: David Malpass, thanks so much for speaking to the Council on Foreign Relations. (Applause.)

MALPASS: Thank you, Michelle. Thanks, everybody.


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