Rich-poor split could tighten ‘grip of poverty’: World Bank chief

The new head of the World Bank
said Tuesday that growing divides between rich and poor nations risked
deepening poverty in the developing world, at a meeting of G20 finance
ministers in India.

Many countries are still recovering from the double blow of the coronavirus
pandemic and fallout from Russia’s war in Ukraine — which hit global fuel
and commodity prices.

Climate change, meanwhile, is most painfully affecting some of the poorest
countries least able to cope.

Ajay Banga, president of the World Bank, said he feared a lack of progress
was in danger of splitting the global economy, to the detriment of the
world’s poorest.

“The thing that keeps me up at night is a mistrust that is quietly pulling
the Global North and South apart at a time when we need to be uniting,” Banga
told the two-day meeting of finance ministers and central bank chiefs in
Gandhinagar, Gujarat state.

“The Global South’s frustration is understandable. In many ways they are
paying the price for our prosperity,” said Indian-born Banga, a naturalised
American citizen who took up the bank post last month after being nominated
by US President Joe Biden.

“When they should be ascendant, they’re concerned promised resources will be
diverted to Ukraine’s reconstruction, they feel energy rules aren’t applied
evenly, constraining ambition, and they’re worried the grip of poverty will
pull down another generation.”

The World Bank said it is working to increase its financial capability —
including by raising hybrid capital from shareholders — to spur growth and
jobs, but said the future economy could not rely on expansion at the cost of
the environment.

“The simple truth is: We cannot endure another period of emission-intensive
growth,” Banga said.

Indian Finance Minister Nirmala Sitharaman, chair and host of the get-
together, launched talks on Monday by reminding leaders of their
responsibility “to steer the global economy towards strong, sustainable,
balanced and inclusive growth”.

The United States says efforts to reform multilateral lenders such as the
World Bank and other regional institutions could unlock $200 billion over the
next decade.

– Little progress on debt –

Debt restructuring deals for low-income nations have been a key focus of The
Group of 20 major economies, but officials suggest there has been little
headway.

China, the world’s second-largest economy and a major lender to several
stressed, low-income countries in Asia and Africa, has so far resisted any
one-size-fits-all debt restructuring formula, officials said.

More than half of all low-income countries are near or in debt distress,
double the amount in 2015, US Treasury Secretary Janet Yellen said.

Yellen on Sunday said a deal on Zambian debt had taken “too long to
negotiate”, but added she hoped debt treatments for Ghana and Sri Lanka could
be “finalised quickly”.

Finance ministers from regional rivals and neighbours India and China met
early Tuesday, without commenting to reporters.

The G20 talks have also focused on multilateral development banks’ reform,
cryptocurrency regulations, and easier access to financing to mitigate and
adapt to the impact of climate change.

A newly agreed first step on a fairer distribution of tax revenues from
multinational firms — reached by 138 countries last week — is also set to
be delivered.

Multinationals, especially tech firms, are currently able to shift profits
easily to countries with low tax rates even though they carry out only a
small part of their activities there. (BSS/AFP)