Letter from David Malpass, World Bank Group President

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Our development mission is clear: to advance shared prosperity and end extreme poverty. The challenges remain urgent. For many countries, poverty reduction has slowed or even reversed, while investment and growth will not be enough to raise living standards. Poorer countries face many challenges in achieving basic development gains, including severe deficits in clean water, electricity, health, education, jobs and private sector competitiveness; barriers to the full inclusion of women in economies and societies, alongside policies that too often favor elites rather than creating work opportunities and support for those most in need; the urgency of environmental and climate challenges; and the surge in debt that is not bringing true benefits.

Economic growth has been the key engine of poverty reduction around the world. However, in many countries, especially resource-based economies, the benefits of growth weren’t allowed to spread — growth helped increase average incomes, yet it did not increase median incomes or lift the poorest 40 percent of the population. With global growth slowing, median income growth is sluggish in much of the world and declining in many poorer countries. In middle-income countries slower growth erodes the living standards of the middle class, with many joining the ranks of the poor. This adds to the challenges facing the 2030 Sustainable Development Goals, and the key poverty reduction goal is at risk of not being met.

World Bank Group commitments to help countries achieve better development outcomes were nearly $60 billion in the fiscal year that ended on June 30, 2019. With weak investment prospects in many developing countries and recession risk in Europe, it has become even more urgent for the Bank Group — IBRD, IDA, IFC, and MIGA — to step up our effectiveness and impact.

Working together, these institutions have the tools to help address the challenges emerging around the world. The IBRD-IFC capital package, approved by the Board of Governors in October 2018, will provide additional lending capacity along with institutional and financial reforms designed to ensure IBRD’s long-term financial sustainability. IBRD has further strengthened its financial management by introducing a Financial Sustainability Framework, including a sustainable annual lending limit. A strong IDA19 replenishment in December 2019 will extend our ability to support good development outcomes and better lives for the poorest people around the world.

We are sharpening our focus on selective and impactful country programs to improve growth and development outcomes. IBRD commitments exceeded $23 billion this year. Commitments by IDA, which provides grants and low-interest loans to the world’s 75 poorest countries, were $22 billion, of which nearly $8 billion were grants. Together, these Bank programs helped more countries come closer to achieving their development priorities.

Demand for human capital investments continued to grow over the fiscal year — reflecting the significant role this financing can play in promoting long-term inclusive growth and alleviating poverty. Over 60 percent of Bank operations helped address gender gaps and encouraged full incorporation of women in economies and societies. Several once-closed societies are allowing welcome improvements in the legal, economic, and social conditions for girls and women. Much more progress is absolutely necessary.

The need for the rule of law and greater transparency is an increasingly accepted development priority. In development finance, transparency in sovereign debt and debt-like contracts is vital to improve the quality and profitable allocation of capital and new investment.

For fiscal 2019, 31 percent of IBRD/IDA commitments contained climate co-benefits, exceeding the Bank’s target of 28 percent by 2020. In December 2018, the Bank announced a $200 billion five-year mobilization target to help countries address climate challenges and put adaptation finance on a par with mitigation.

Our goal is for countries to achieve economic success and broad improvements in living conditions. As they advance, our relationship with them should evolve so that a growing share of our IBRD lending is available to countries in lower-income thresholds. For example, China achieved major increases in GDP, median income, and prosperity, so our interactions are becoming more technical as lending declines. China’s policies are changing rapidly to improve global public goods, address environmental and climate change problems, and reduce plastic and micro-plastic in its rivers. China has evolved from a large-scale borrower to an important voice in the development dialogue and a key contributor to IDA.

We are working in fragile areas, such as the Sahel and the Horn of Africa, to help countries build stronger foundations so that young people are more able to stay rather than seeking to migrate. IDA commitments to countries affected by fragility, conflict, and violence reached $8 billion in fiscal 2019.

Many countries will need a much bolder agenda for boosting private sector growth to generate more and better jobs. This entails major changes in the business climate so that the private sector can compete with the state on a level playing field — critical for generating jobs, profit, and innovation.

The World Bank Group is increasing financing for economic and institutional reforms to enhance private investment and job creation in developing countries. As the largest global development institution focused on the private sector, IFC creates markets and opportunities for sustainable private investment where they are needed most. IFC is shifting its focus to working upstream to create a pipeline of bankable projects that will increase private investment in the world’s poorest countries. MIGA is the largest multilateral political risk insurance provider, with a mandate of creating development impact by helping attract foreign direct investment to developing countries. Nearly 30 percent of MIGA’s guarantee program over the fiscal year supported projects in IDA countries and fragile settings, and almost two-thirds contributed to climate change adaptation or mitigation.

Across IBRD/IDA, IFC, and MIGA, we are working to increase our commitments to lower-income countries as they improve their development outlook and to shift resources toward countries suffering from fragility, conflict, and violence. We will be improving our effectiveness and budget discipline throughout the year to make more resources available to meet client needs and challenges.

I am deeply optimistic that courageous, enlightened leadership and strong policies can work to improve living conditions for those most in need. I saw first-hand the scope and urgency of the development challenges during my trip to Sub-Saharan Africa in April. I am hopeful there is a path forward, having seen Prime Minister Abiy and his team launching ambitious reforms in Ethiopia, the potential of the world’s largest solar energy plant in Egypt, the resilience of the people of Mozambique after the devastation of twin cyclones, and the inspiration for the people of Madagascar after its first peaceful leadership transition.

The people in developing countries are facing immense challenges. The World Bank Group and all our personnel and resources are committed to working with our partners around the world toward policies and solutions that improve their lives.

 

David Malpass
World Bank Group President