V20 Ministerial Dialogue X Statement delivered by Mr. Axel van Trotsenburg, Senior Managing Director, World Bank
V20 MINISTERIAL DIALOGUE X
16 April 2023
Mr. Axel van Trotsenburg, Senior Managing Director, World Bank
Good morning, everybody.
It’s a pleasure to be here. I think that I would also like to thank you to spell out the Accra-Marrakech Agenda, it is very helpful. What was even more helpful today is to show the video of the U.S. Ambassador because she touched on something very simple. She asked for a credible action; and, I think, when we’re at these meetings, we will need to look really at credibility of all our actions and we need to do a lot more.
So, I would like to touch in this context on climate change, debt sustainability, and debt, as well as on the evolution roadmap of the Bank and what that means.
I think that, as an introduction, the V20 is interesting as a group. In that it is not only uniting low-income countries and SIDS, but also quite a set of middle-income countries, be it in East Asia, be it also in Latin America, like in Central America or Colombia, for example. So, I think, it’s very important that this is not only a low-income problem but also a middle-income problem, and there are different solutions for that.
Similarly, I think it is very important that this forum talks about climate change not only on mitigating it but, particularly, on adaptation; and that is really the first call that where everyone is sitting that we need to keep that balance and put a lot of emphasis on adaptation. I think that is what we are trying to do, certainly, in the IDA context, that right now, for example, last year 60 percent of our climate finance in IDA countries is dedicated to adaptation. And, I think, that is, or should be, actually, an immediate target by everybody to make sure that the adaptation agenda is lifted up, and I think that is quite important.
Also, what is important here is that can we do, actually, more in terms of financing as well as in terms of concessional financing and grants? I think what we have been doing in the V20, basically, over the last couple of years, we have steadily increased the last three years. It was about an amount of $91 billion for the V20. That is up by 55 percent in the three years before that; and climate financing, in particular, grant financing has actually, quintupled over the last six years to about $5 billion per year. But what we are also seeing is that while this is going to the IDA countries to concessional financing, we are challenged, and that is a discussion we need to have is how do we best support middle income countries because the middle income countries to get concessional financing is a much harder way to do, and we need to think about how we can support these countries as well.
Let me also turn to the debt issue. I think that, clearly, there are, in the IDA context right now, 60 percent are either debt distressed or in high risk of debt distress, and there are quite a few of also middle-income countries that are having problems. Some of this is now being dealt with in the Common Framework but, I think, what we need to emphasize is the urgency of action. It is, of course, a completely different landscape compared to the IDA landscape and, therefore, to find easy solutions is more difficult; and, I think, there we will need all the efforts of everybody but, I think, what is most important is when we have the discussions, we need to keep in mind that every minute that these debt restructured are delayed, we are taxing the countries that are affected. They need a reset and, I think, there is urgency, and so, we need to look at that.
So, we need debt workouts. Secondly, we need in the future, particularly related to climate financing, much more longer-term financing that is easier done in low-income countries. It is more difficult in middle-income countries. Again, this is an area where we need to work together.
In terms of debt relief, I just want to say that the bank learned from HIPC, it learned from MDII. We, actually, introduced debt relief on the basis of Debt Sustainability Analysis. We provide easier terms when a country is in debt distress or when we have our traffic light when a country gets a red light, it gets more concessional support, be it including in grants. So, we need to keep that in mind. I think this is something also other creditors should think about.
Now, finally, on the evolution roadmap, I think we had, actually very good discussions at the Development Committee. I would say the bottom line is we got to first base. I’m not a baseball player but I understand first base, and we wanted a homerun, but we maybe get the homerun in Marrakech, and we will work altogether on this, but here is one of the more difficult questions, and that relates to here on climate, but I would also say climate and development because we should not completely forget the development agenda is in desperate need as well. And that is, what is the ambition for the multilaterals? Personally, I say, given the challenges on the SDGs, given the challenges on climate, given the challenge of fragile, we need to be hugely ambitious and see how we can actually lift that gain by all. I’m not talking about the World Bank alone – everybody. And, I think, that is probably a discussion how we can actually gravitate the world community at the SDG Summit or in Paris in June, or in COP28 that, really, we do something and then be reminded by this huge ambassador, it is credible action. It is not an announcement. It has to be credible, and then we have to deliver.