Statement delivered by Mr. Axel van Trotsenburg, Senior Managing Director, World Bank
V20 MINISTERIAL DIALOGUE XII
16 April 2024
Washington D.C., USA
Mr. Axel van Trotsenburg, Senior Managing Director, World Bank
Thank you very much, Mr. Chairman. And let me just start with a warm welcome to everybody here to the World Bank and the Spring Meetings. These are gatherings for good discussions and — but also to see how we can make progress on a vast agenda, we just heard that before.
But also, let me also start with thanking Ghana for having chaired the V20 Forum so well. I would also like to thank my friend Ken Ofori-Atta for all that you have done for the V20. I think it has been actually remarkable where we are, and thanks to your leadership on this. So, I really would like to recognize you on this. I also would like to warmly welcome Barbados as the new Chair. We very much look forward to working with you on this, and thanking everybody in general. This is an important agenda to really draw attention to these vulnerabilities.
And there are really two big ones that are mentioned in today’s title, it’s the whole issue about climate change, but also on the debt issue. And unfortunately, debt is still with us and climate change as well.
I think that what is very important is that we need basically not only to work together in words, but in deeds, and we need to show what we can to deliver. And I will want to touch on this. Certainly, when you are with the World Bank, we have to deliver on three things. The first one is, of course, on the financing and the programs that you need. But secondly, also on the knowledge and the analytical work that we all need. And then third, on how we convene. How we convene, clearly, not only for exchanging, but also be ambitious in defining the next stage of what we need to deliver.
Clearly, I think what you just mentioned before is — the fact of the matter is that the news is not particularly good. Whether you look at the climate change agenda, whether you look at the debt agenda, whether you look at the SDGs, we’re all falling short, and now we need to see, can we actually do things better together and that calls on better coordination. If we are better coordinated, maybe we can actually leverage better not only the money, but also the knowledge. Therefore, I think this kind of V20 Forum is very, very important.
Not only that, and the general thing is, the V20 Group is an interesting group, because it is not only the low-income countries, but what sometimes people are forgetting there are also quite a few middle-income countries. And then on top of this the SIDS, you know, and small states. And I think they need a voice, they need a forum, and they have very specific challenges.
What is very often forgotten, that small states, when you’re not working on, if you look at their GDP per capita. And you think, well, they are higher, but it is unfortunately, and completely unrepresentative of the realities the countries are facing. And therefore, I think we need to have that sensitivity, but then also the reaction to this.
Now, I think that actually in Marrakech, we had a good meeting — I participated in this. But it was also to see how we can actually push the agenda first. And of course, the first goal is, when you look at the World Bank, can you actually do more.
And as always — but it is also for a reason that because of the multiple challenges, and unfortunately, with climate change, you see a lot of the small states being disproportionately affected by climate change. And unfortunately, in the case of Africa only responsible for 3 percent of the emissions, is disproportionately affected by climate change. So, it should not be a surprise that there is a call for more.
I think what we are doing in the aggregate, we have that if you look at the pre-COVID time, we were in the order of $25 billion in support to the middle — to the V20 countries. We are in the last 3 years on average into $38 billion. So, we have increased it by 50 percent. That is good.
What we need to do is not only to look at one entity, you need to look if there is cumulative additionality or bilateral, commercial and others also contributing. And that is sometimes a challenge.
The second one is that we need to be very sharply focused, not on the climate agenda, in an area that we know that only provides mitigation support, but also adaptation support, and here the balance has to be. I think we are doing better in the low-income countries with a balance between adaptation and mitigation. But this is something that we need to be very, very sharply focused on.
What I think, in terms of the analytics, we have actually been also in the whole evolution roadmap, not only looking what you can do more with the existing capital, but we have also recently presented a knowledge compact, because knowledge is important, but also how we do that. And a good example is in the climate area where we have started with this Country Climate and Development Reports. Again, emphasizing the climate in itself is not the only thing, you need to link it with development. You cannot unlink from this.
Secondly, what is important is to provide the perspective [on] how countries can get to net-zero by 2050. The harsh reality is that the challenge is hard. The lower the income is, the more investment as a percent of GDP is required. Whereas, high income countries can do it at some time in the order of 1 percent, 1.5 percent of their GDP. In the lower income countries, very often you have to have a need in excess of 5 percent per year in additional investment. That gives you also a sense of the challenge that the countries are facing. In addition, what we need to keep in mind, particularly when you’re in the Caribbean, or in the Pacific, if a hurricane or a typhoon hits, you don’t have a damage of 1 percent of GDP. Now, you’re looking at 10, 20, 30 and sometimes 80 percent of GDP. And that is where the problem starts, because with that you are immediately in a debt crisis, because basically the funding is enormous. If it’s short term, it’s even more challenging. That is one of the areas where we need to look also on how we are dealing with the debt issue also related to the debt crisis. And that means we have been looking at our toolkit, what we can, to improve that is in the Caribbean that can be with climate — in general with climate resilient debt clauses.
Like in countries like Jamaica, we have been supported with cat bonds. We also have the cat DDOs. We have, of course in IDA also the Crisis Response Window. So, those things are basically important that we need to deal with. And I think the Bank is very committed that we need to do more.
So, let me not forget two things. One is the debt issue. The debt sustainability needs to be front and center, because this is really a fundamental issue. And we need to be supportive of that, and that requires concessional resources. That I would say — this is going to be a challenge also for the IDA21 replenishment. But I think concessional money should not be taken from the low-income countries going to the middle-income countries. We need to do more. We need to make sure that that is ensured for all the low-income countries. For the middle-income countries, we need to think about how we actually provide that support. And that is one of the challenges, because there is less money for middle-income countries available for concessional funding. What we need to do is there, certainly, IBRD can support, because basically we can be given much better terms than others, but also the other Multilateral Development Banks can provide that critically needed work.
To conclude is that, what we are willing to do is, we need in constant contact to see are we basically responding adequately to these challenges? For example, with the Crisis Toolkit, do we need changes?
I think I would just want to say there is openness on this. At the end of the day, do we support you in the best possible way? Secondly, we need to make sure that IDA21 is a success, because basically their needs are large, and that commitment should be unwavering. Finally, we need to work with you on the debt issue. Debt is certainly a huge commitment. We see there is the need. We have the Global Sovereign Debt Roundtable together with the Fund and the G20 Presidency and the key stakeholders’ dialogue. We need to see when countries need to be delivered much, much quicker. And certainly, the Bank is committed to them, but I think also the key shareholders are also very eager to do that.
Finally, we need to make sure that the financing packages for the challenges for middle-income countries are forthcoming. So, let’s be also nuanced, because basically that it is not only a low-income country agenda of the V20, we need also to keep — be mindful of the middle-income countries, and that I think we can also help with our IBRD support. Of course, not to forget that the private sector — can be supported through our private sector mechanisms like IFC and MIGA. Let me turn back to the Chair.
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