The World Bank's Crisis Response
In early October 2020, the president of the World Bank Group (WBG) gave a speech to address the COVID-19 pandemic and the World Bank’s crisis response. In his speech, WBG president David Malpass discussed the enormous toll that the COVID-19 pandemic has had on developing countries. He also stated that the World Bank’s response would focus on alleviating poverty, inequality and debt burdens, and support educational and health opportunities.

Disparities

Dramatically uneven access to Personal Protective Equipment (PPE) across the globe is one indication of global disparities in economic well-being, which in turn have affected pandemic response capabilities. Lowering the transmission of COVID-19 requires the coordination of a globalized response. However, localized country-wide challenges in securing PPE, the most basic of pandemic safety necessities, prevent this possibility.

Illustrating this challenge is the fact that low-income countries have little economic agency to act during the global pandemic. Developed countries may face shortages in supplies of PPE. Those countries may even opt to reduce the supply of outgoing PPE sales in order to remediate domestic shortages. However, restrictive budgets, few local manufacturers and no way to import PPE exacerbate shortages in developing countries.

A 2020 National Institute of Health study estimated that if countries tightened up sales of PPEs, “export restrictions could initially increase prices of medical masks by 20.5%, Venturi masks by 9.1%, and protective equipment, such as aprons and gloves by 1% and 2% respectively” around the globe. For instance, a recent survey of seven low-income developing countries across the world showed that on average, clinics and health centers were only able to supply two of four necessary PPE items to medical staff. The challenges presented by PPE distribution demonstrate the importance of the World Bank Group’s aid programs around the world.

Dual Challenges

Lockdown guidelines that have successfully “flattened the curve” in developed nations are not always a viable option for developing economies. For example, in India, nearly 90% of the workforce is in the informal employment sector. In sub-Saharan Africa, 86% of workers have informal employment. The nature of informal work requires workers to leave the house for work and as a consequence, choose between keeping their families fed or respecting lockdowns. Countries that struggle to lower transmission rates or offset the financial damage of lockdowns see dual challenges. Implementing measures that “flatten the curve” and lower transmission rates cause economic harm. On the other hand, failing to reduce hospitalizations inflicts strain on medical systems, leading to high infection rates and death tolls.

“A Fire That Must Be Put Out”

In the World Bank Group’s June 2020 COVID-19 Crisis Response Approach Paper, the ongoing COVID-19 crisis is described as “a fire that must be put out.” As a direct result of the pandemic, for the first time in 60 years, the World Bank projected that Emerging Markets and Developing Economies (EMDEs) will contract. The global economy will likely shrink by 5.2% in 2020, the deepest recession since World War II. For comparison, the global economy shrank less than 2% during the 2009 financial crisis. A number of traits cause EMDEs to be especially vulnerable to the pandemic’s negative economic impacts. Traits such as weaker health systems, dependence on global trade and tourism exacerbate financial instability. For the first time in decades, global poverty will rise.

The World Bank Group’s Response

International financial institutions, including the WBG, are moving quickly to prevent the loss of hard-won development growth in EMDEs. The WBG has recognized the new paradigm of the pandemic and as an organization, has shifted its focus to a crisis response agenda. In April of 2020, the WBG announced the first projects directly related to COVID-19 and prepared to deploy up to $160 billion over a period of 15 months to address COVID-19.

Like other international organizations, the World Bank’s crisis response to COVID-19 aims to focus on issues directly related to the pandemic. However, the WBG ensures a continuation of its broader development objectives by placing its COVID-19 crisis response agenda within its own Twin Goals. Adopted in 2013, its Twin Goals are to bring extreme poverty down and to promote prosperity among the bottom sector of every country. The WBG’s massive $160 billion project rollout focuses on direct response to COVID-19, and on protecting past economic development gains. This includes maintaining steady progress towards the Twin Goals.

The World Bank’s current crisis response agenda can be divided into near, medium and long-term agendas. These agendas are termed relief, restructuring and resilient recovery. Relief relates to dealing with the most direct impacts of COVID-19. Its restructuring plans include strengthening health systems, restoring human capital and restructuring social and economic sectors. Resilient recovery is about building a future in recognition of a changed post-pandemic world. In pursuing these plans, the WBG ultimately aims to assist at least one billion people affected by the pandemic.

– Marshall Wu
Photo: Flickr

Healthcare in Armenia
Armenia is a mountainous nation of nearly 3 million people. It neighbors Iran, Georgia and Turkey. Over the past three decades, healthcare in Armenia has undergone a slow reform. The country is transitioning from an inefficient model of centralized healthcare to a modern system focusing on family medicine. Many Armenians feel dissatisfied regarding their healthcare system. However, organizations like the Health for Armenia Initiative and the World Bank are working with the Armenian government to improve options for Armenians.

Armenia’s Healthcare History

Healthcare in Armenia during the Soviet era was a centralized medical system. Experts state that the Soviet system was technologically underdeveloped and inefficient. The healthcare model focused on centralized care in hospitals and medical professionals were highly specialized.

Armenia declared independence in 1991, and healthcare in Armenia underwent radical changes. Local governments took over primary health care sectors while regional governments gained ownership over hospitals. Armenia’s State Health Agency is now in charge of the healthcare system. The government allocates resources to these publicly owned facilities. Since its independence, Armenia has implemented many healthcare reforms. A major piece of legislation called the “On Medical Aid and Medical Services for The Population” created a system that allows patients to help pay for healthcare services. This development plays a role in why Armenians find themselves funding most healthcare expenditures with out-of-pocket expenses.

Armenians in certain years paid up to 89% of healthcare charges in out-of-pocket expenses. This is incredibly taxing, given that Armenians earn an average per capita household income of around $1,500 USD. Their inefficient and expensive healthcare system places a heavy financial burden on impoverished peoples. Patients are slowly transitioning to primary healthcare providers with financial regulations replacing older regulations. However, a lot of work is still ongoing to improve the healthcare situation in Armenia.

How Armenians Feel About Their Healthcare

A 2018 report outlined a recent picture of healthcare in Armenia. Around 400,000 people in Armenia are poor or near-poor. Meanwhile, at least 233,000 of these people are part of a vulnerable group including the disabled, children and the elderly. In 2014, 31.8% of the poorest of Armenians reported that they were sick for more than three days, but they did not seek treatment because of financial reasons. Only 4.2% of the richest Armenians made the same decision.

A public opinion report that BMC published in 2020 outlined the current feelings the Armenian people have towards their healthcare system. The researchers polled over 500 Armenian citizens about the country’s healthcare system. Nearly half of respondents did not believe that citizens had equal access to healthcare in Armenia. Almost 70% of respondents felt that the government should have a larger responsibility towards an individual’s health which included funding healthcare services.

The Healthcare for Armenia Initiative’s Mission

Armenian natives and internationals formed the Healthcare for Armenia Initiative (HAI) in 2016. The initiative’s team focuses on bottom-up reforms to increase rural Armenians access to the constitutional right to healthcare. HAI’s projects focus on developing and maintaining healthcare professionals that can provide services in high-need areas.

HAI defines its work around six pillars, and among these pillars are education, research and leadership. It focuses on these three by holding workshops. It held a two-day workshop in partnership with the National Institute of Health of Armenia where it “[discussed] how to improve health education and healthcare in Armenia.” Organizations like HAI have helped to inform recent changes in government policy that will hopefully address the healthcare needs of the Armenian people.

Recent Changes for Healthcare in Armenia

The Armenian government in partnership with the World Bank published a guideline for the Health System Modernization Project. The main goal of the partnership is to improve access, quality, efficiency and governance for Armenian healthcare. The project focuses on adopting an efficient family medicine model. The transition to a family medicine model requires training new doctors that are not overspecialized.

A major priority of the project was to train the number of healthcare professionals necessary to run a family medicine-style healthcare system. At a final cost of nearly $6 million USD, this project component costs less than the projected $7 million. This key part of the project trained 980 family medicine doctors and nurses. The World Bank reports that these numbers should support 60% of the country’s needs.

Armenia and the World Bank cooperated on three other major components as part of this modernization project. They optimized and renovated the hospital network. The project reorganized the Armenian Ministry of Health so the agency could better function as a regulator of healthcare. These reforms gave the Ministry of Health many monitoring tools to efficiently implement and regulate the healthcare reforms the country is undergoing. Armenia’s government also established the Health Project Implementing Unit (HPIU). HPIU is a part of the Armenian Health Ministry that monitors, reports on and provides strategic planning for the overall healthcare modernization project. All of these developments cost around $30 million USD to achieve.

Where Healthcare in Armenia Stands

Healthcare in Armenia is an inequitable system in the process of reforms and transition. Armenia with the help of national and international institutions is moving to a family medicine system that meets the financial and medical needs of its people.

Jacob Richard Bergeron
Photo: Flickr

Lead Poisoning in Children
For more than a century, the people of Kabwe, Zambia have lived with devastatingly high levels of lead exposure. In 1994, after 90 years, Kabwe’s lead mine shut down. More than 25 years later, the people of Kabwe still suffer the consequences of decades of unstable mining and nearly nonexistent clean-up efforts by mine owners. Environmental health authorities say Kabwe has unprecedented levels of lead contamination leading to lead poisoning in children.

The EPA “defines a soil lead hazard as 400 parts per million (ppm) in play areas and a 1,200 ppm average for bare soil in the rest of the yard.” Black Mountain, a favorite place for Kabwe’s children to play, measures a staggering 30,000-60,000 ppm. The “mountain” is a massive heap of refuse. Adults often crawl through make-shift tunnels mining for lead, copper, manganese and zinc to sell. With more than half of Zambia’s population living below the poverty line, mineral scavenging provides vital income. Many people who venture beyond the “DANGER KEEP AWAY!” warning outside the mine site, say the risk of lead poisoning is a necessity if they want to feed their families.

Children at Risk

Lead poisoning in children is at a disproportionate rate due to children’s developing bodies and brains. Children absorb four to five times more lead than their parents. Lead exposure can result in skin rashes, poor appetite, weight loss, cough, stunted growth, learning disabilities and death. Often, lead poisoning goes undetected until it is too late. Many families will hide their lead-poisoned children because they fear stigma due to their child’s symptoms. In Zambia, 45.5% of children live in extreme poverty. As a result, they do not often have access to proper healthcare to treat lead poisoning.

The World Bank Project

The World Bank is funding a $65 million project, the Zambia Mining and Environment Remediation and Improvement Project (ZMERIP). The project aims to reduce environmental risks in lead hot spots. It also seeks to assist the Zambian government in addressing the dangers of lead exposure and implementing safety protocols, providing health intervention and engaging mining companies in expanding awareness of their environmental and social responsibilities.

In 2020, the ZMERIP began the largest health intervention to address blood lead levels (BLLs) in children in Zambia. More than 10,000 children received lead poison testing. The CDC recommends a BLL in children of no more than 5 µg/dl. Of the children tested, 2,500 had BLLs of 45 µg/dl or more. Chelation therapy, “which binds the lead into a compound that is filtered out through the kidneys”, is the preferred treatment for children who test 45 µg/dl or higher. Children who test lower, receive vitamin supplements, iron and protein as treatment.

The World Bank attempted another project similar to the ZMERIP in 2011 but achieved little progress. With lessons learned, the World Bank is hopeful this new project will be successful. If the project attains the goals it has set out to complete, more than 70,000 people including 30,000 children will benefit from the information. While some Zambians have yet to realize the risks of lead exposure, the World Bank reports mostly positive responses to their health advocacy.

The Future for Zambia

For the children of Kabwe, the ZMERIP offers hope of reducing lead poisoning in children. It offers hope that play is not a risk and a toddler’s appetite for a fistful of dirt is not a life sentence by lead poisoning. The key to the project’s success is continuing prevention practices, education, remediation and the Zambian government’s obligation to enforce safety regulations after the project’s completion expected in 2022. The ZMERIP’s commitment places focus on improving the lives and futures of Kabwe’s most vulnerable and valuable asset, its children, the country’s future.

Rachel Proctor
Photo: Wikipedia Commons

Bank Access in Afghanistan
Bank access in Afghanistan is a step toward financial inclusion for the rural poor. According to Jan Chipchase and Panthea Lee’s research on the nascent mobile-phone-based financial services that were available in Afghanistan in 2010, theft and bribery plagued the banking system. Person-to-person transfers were not widely available until the creation of the M-Paisa mobile money transfer service. Roshan launched the M-Paisa mobile money transfer banking in Kabul in 2010 when 83 bank accounts existed per 1,000. Through this service and other programs, improvements in the availability and quality of bank access in Afghanistan have been a major contributor towards reducing income inequality and poverty.

Gradually Improving Access

With limited credit available, Afghans were hiding money at home under the mattress, and forms of money ranged anywhere from banknotes to gold jewelry to livestock. The rural poor did not trust the banking system, and the use of the word “Paisa” helped to make the service seem more trustworthy, although it posed access challenges for the rural poor. By 2014, banking access improved for 40% of Afghanistan’s population, with a 7% increase in the availability of financial services. However, access to credit was still out of reach to the rural poor as most of the banks were located in Kabul province, an urban area. This made it more difficult for rural people to get loans to start businesses.

In 2015, a project to bolster bank access in Afghanistan made a step toward financial inclusion for the rural poor with the start of the Afghan Rural Enterprise Development. The project sought to integrate rural agricultural communities into the economy. Employment opportunities emerged in poor rural villages by the creation of savings and enterprise groups along with loan associations. According to The World Bank, the rural poor received assistance in building their own businesses, which increased the value of trade, ensuring new opportunities. This created access to credit through internal lending, which focused on small and medium-sized enterprises, or SMEs. This program was so important because it targeted people who traditionally could not access the banking system.

The Reason it Matter

As of November 2019, more data exists to support the successes of bank access in Afghanistan that The United Nations Economic and Social Commission for Asia and the Pacific published. The goal of the report was to assess the status of financial inclusion for all adults in Afghanistan age 15 to 64 including women. Financial inclusion in a “broad range of quality and affordable financial services including but not limited to account, payment, saving, and credit provided by formal financial institutions in a fair, transparent, and sustainable manner.” According to this presentation, 15,000 bank accounts exist per 100,000 adults, and in 2021, projections determined them to be 20,000. Expectations have determined that mobile money accounts and accounts that women hold will also grow during the same period. Although the success of banking the unbanked in Afghanistan has been slow, steady progress has occurred toward financial inclusion of the rural poor and women.

It is clear that bank access in Afghanistan and credit is allowing the rural poor in Afghanistan to do better financially. However, according to the World Bank Afghanistan, “the COVID-19 crisis will have a serious and sustained impact on Afghanistan’s economy. Recovery is expected to take several years, with new investment constrained by political uncertainties, continued insecurity, and questions around ongoing international support.” It is important to maintain international support for improving banking access to preserve opportunities for Afghanistan’s rural population.

Kathleen Shepherd-Segura
Photo: Flickr

Post-pandemic debt crisis
With the 2020 onset of the COVID-19 pandemic came a drastic slow in economic activity and collapse in government revenue, prompting a widespread increase in both government and private debt levels. Currently, at the beginning of 2021, with no concrete prediction for the end of the COVID-19 pandemic, businesses and the private sector continue to accumulate great foreign currency debt. There is a steady increase in government loans for funding and there has been at least a 20% reduction in 2020 remittances from global citizens and diasporas. Developing nations report skyrocketing borrowing needs that are usually that advanced economies can usually only manage. Additionally, central bank purchases of corporate bonds to boost the money supply of local firms have stifled the debt ratings of local firms in emerging markets and developing economies. As a result, our world is facing rising budget pressures, which a wave of sovereign debt downgrades that are likely to lead to a post-pandemic debt crisis are accompanying.

Context and the Role of the IMF

In comparison to the end of 2019, in addition to already unusually elevated figures and debt distress, expectations have determined that 2021 debt ratios will increase by 20% GDP in advanced economies, 10% in emerging market economies and 7% in low-income economies. Unfortunately, the emerging and developing world have much smaller borrowing capacities, and so for some, a post-pandemic debt crisis appears imminent.

In the past, debt crises have set the global economy into long-lasting instability. In order to prevent such an economic downfall on top of a global health crisis, many of the leading international organizations such as the International Monetary Fund (IMF) have prepared to help keep nations afloat. While the IMF has provided over $30 billion in emergency funding to its member countries in a response to the pandemic, it has also given direct attention to implementing measures that contribute to debt-service relief. Here are some of these measures.

4 Measures to Contribute to Debt-Service Relief

  1. Catastrophe Containment and Relief Trust (CCRT): Undergoing establishment in 2015 as a response to the Ebola outbreak and receiving modification in March 2020 for the COVID-19 pandemic, CCRT allows the IMF to provide grant funding for debt relief to the poorest and most vulnerable nations that a natural disaster or public health crises have hit. The purpose of the CCRT is to aid eligible low-income member countries to meet the balance of payment needs that disasters create. This stops the reassigning of resources to debt service, preventing a post-pandemic debt crisis.
  2. Debt Service Suspension Initiative (DSSI): In a collaboration between the IMF Managing Director and the President of the World Bank, a call emerged for the bilateral creditors to suspend debt service payments from the poorest member countries until the end of 2020, extended to June 2021. Accepted in April 2020, this debt suspension allows 73 low and lower-middle-income countries to temporarily receive relief from their debt service payments. In addition to releasing the countries’ resources to COVID-19 relief, this initiative prompted the International Institute of Finance (IIF) to also call for private-sector creditors to grant debt payments forbearance to their debtors in a similar way. Many private firms have volunteered to aid in debt relief as a result.
  3. Short Term Liquidity Line (SLL): With the increase in global uncertainty, the IMF has established a short-term liquidity line (SLL) with the unique design of being a liquidity backstop for its member countries who have superior policy and fundamentals, but are in need of increased immediate liquidity needs as a result of the external shocks that came with this global pandemic. This liquidity line has a lower cost structure than other typical IMF lines of liquidity such as the Flexible Credit Line (FCL). This allows for a country to retain cost savings relative to reserves, and benefits related to lower yields on public debt.
  4. Capacity Development: In addition to its financial support, the IMF is also offering real-time policy guidance and capacity development to more than 160 of its 190 member countries. This advice is for specifically navigating debt management strategies, cash management, financial supervision, cybersecurity and economic governance through the pandemic. The IMF has collaborated with tax administrations and budget officers to restore and support halted or slowed business operations. It has also launched online learning platforms available to government officials, members and the general public for the widespread reach of solutions to aid in economic recovery during and post-pandemic.

Cause for Optimism

With the measures above, as well as the collaborative effort of the entire globe, according to the IMF Managing Director Kristalina Georgieva, “the global economy is beginning to climb back from the depths of the crisis, but this calamity is far from over.”

Thankfully, the IMF continues to show its commitment to providing financial support, capacity development and debt relief, especially for its poorest, most affected and vulnerable member countries in this unprecedented time, as the world works to stave off an impending debt crisis.

Rebecca Harris
Photo: Flickr

Africa Climate Business Plan
In 2015, the World Bank launched the Africa Climate Business Plan. The Plan marks a strategic effort to accelerate low-carbon, climate-resilient development in sub-Saharan Africa. A great success, the World Bank is now in its first stages of rolling out the Next Generation Africa Climate Business Plan, building off of lessons learned from the first installation. The new plan is ambitious, but necessarily so—with climate impacts on the rise and less than a decade left to achieve the U.N. Sustainable Development Goals (SDGs), Africa must rapidly deploy climate-smart, inclusive development projects. The Next Generation Africa Climate Business Plan stems from the World Bank’s greater commitment to placing climate at the center of all development efforts. It works toward carving out green paths to prosperity.

A Continent in Crisis

By and large, sub-Saharan Africa has contributed the least to greenhouse gas emissions. Despite this, it suffers some of the most devastating impacts of environmental challenges and changing weather patterns. The year 2019 was the third-warmest year ever on record in Africa.

A sample of 30 African countries found that two-thirds were warming quicker than the whole world on average. Poorer countries are more vulnerable to weather challenges due to the limited adaptive capacity of rural economies. Though Africa’s engines of growth are diversified, agriculture is still its largest economic sector. Agriculture makes up 15% of the continent’s GDP. It is highly climate-sensitive. Changing weather patterns and natural disasters like droughts and cyclones have directly impacted productivity.

Africa boasts a variety of climate types from arid to rainforest or temperate, so changing weather manifests differently in different regions. Effects can range from rising sea levels and coastal erosion to extreme floods, landslides and even desert locusts. These events threaten food and water security, as well as the overall socio-economic development of the continent. Changes in weather reverse development gains, undermining the health, safety and stability of communities. Climate-informed development is urgent; without it, an estimated 43 million additional people in sub-Saharan Africa could fall below the poverty line by 2030.

Strategic Focuses

The Next Generation Africa Climate Business Plan is all about thinking ahead for the future, but this does not mean that the World Bank is not looking to the past for guidance. The new and improved Climate Plan is building on the successes of its predecessor, the original Africa Climate Business Plan. This plan supported 246 projects with more than $33 billion in World Bank financing over the course of its six-year tenure. As the largest financial sponsor of climate action in Africa, the World Bank plans to ramp up existing efforts and institute new initiatives as part of the Next Generation Plan. With the plan, it will work to cooperatively tackling changing weather and promoting development within African countries.

The Next Generation African Climate Business Plan is essentially a sustainable development blueprint with five Strategic Directions. These include:

  1. Food Security
  2. Environmental Sustainability
  3. Clean Energy
  4. Resilient Green Cities
  5. Climate Shocks

The plan also has two Special Areas of Emphasis including Climate-Informed Macroeconomic Policies and Green and Resilient Infrastructure. At its core, it aims to scale up climate resilience as part and parcel of development efforts to reduce poverty and grow economies.

The Plan in Action

Until recently, Adwoa Adezawa, a resident of the Cape Coast of Ghana, lived in a community entirely without power. However, Adwoa, along with thousands of other Ghanaians, could purchase a mini solar grid thanks to the $220 million Ghana Energy and Development Access Project (GEDAP) financed by the World Bank. GEDAP focuses on inclusive access to renewable energy through the deployment of off-grid solar products. The project includes subsidies to make energy more affordable. It also collaborates with local financiers like rural banks to support access to financing. Benin, Burkina Faso, Cabo Verde, Cameroon, Central African Republic, Chad, Cote d’Ivoire, The Gambia, Guinea, Guinea-Bissau, Liberia Mali, Mauritania, Niger, Nigeria, Senegal Sierra Leone and Togo have all rolled out similar solar programs.

Given that sub-Saharan Africa has the lowest energy access rates in the world—electricity reaches only around half of its people—such programs are critical. Efficient, affordable solar energy is a pillar of the Next Generation Africa Climate Business Plan. Furthermore, the World Bank has been scaling up such projects each year.

Other cruxes of the plan include outfitting cities with low-carbon urban planning approaches and promoting climate-smart agriculture. The World Bank already supports modern agriculture projects in Ethiopia, Niger and Zambia. Additionally, it currently works to target 28 million farmers to ensure food security across 20 countries. The World Bank aims to train farmers on climate-smart agricultural approaches and expand integrated landscape management to more than 60 million hectares. Overall, expectations have determined investments in new projects will reach $22.5 billion by 2025. Treating development and climate action as interwoven, interdependent goals, the World Bank is pushing for growth that not only minimizes environmental impact but actively corrects past and future trends of environmental degradation.

Margot Seidel
Photo: Flickr

James WolfensohnJames Wolfensohn, the ninth World Bank president, passed away at the age of 86 on November 25, 2020. During his decade of leadership, the World Bank became a preeminent leader in addressing global poverty as one of the world’s largest financiers of education, health, HIV/AIDS programs and the environment. His legacy as a champion of poverty reduction is worth remembering and is one that future leaders should emulate.

Early Life of James Wolfensohn

Growing up in Edgecliff, New South Wales, Wolfensohn’s father struggled financially. According to his autobiography, “A Global Life,” the financial insecurity that challenged his family through his childhood had a profound impact on his life and was something he would carry with him through his tenure as president of the World Bank.

After graduating from the University of Sydney with an LLB Law degree and later earning an MBA at Harvard Business School, Wolfensohn worked for multiple firms and investment banks. He eventually created his own investment firm in New York in 1981.

Joining the World Bank

When Wolfensohn first came onboard at the World Bank, the Bank was under intense scrutiny. Facing mass protests, a number of failed projects as well as increasing criticism from the investment banking industry and NGOs, many felt the World Bank had lost sight of its mission and objectives.

When Wolfensohn received the appointment of the ninth World Bank president in 1995, the world was facing the aftermath of the collapse of the Soviet Union, an intensifying war in the Balkans and around 31% of the world’s population was living at or below $1.90 per day.

Facing a complex set of challenges as World Bank president, Wolfensohn rose to the challenge and began implementing new initiatives and started retooling projects. Under his leadership, the Bank took steps to refocus on social-sector lending programs instead of the ineffective and expensive infrastructure initiatives of the past. Simply put, he reinstated the World Bank’s central goal: helping the world’s most impoverished nations defeat poverty.

Initiatives and Legacy

Wolfensohn’s policy regarding the debt that many African and South American countries incurred best exemplifies this shift in organizational focus. It is the Debt Initiative for Heavily Indebted Poor Countries (HIPC), a framework for all creditors to provide debt relief to the most heavily indebted low-income countries. The goal of the initiative was to address halted economic growth and slowed poverty reduction due to debt accumulation.

Further policies aimed at reducing poverty included the Comprehensive Development Framework (CDF) and the 1999 Poverty Reduction Strategy. The CDF provided a strategy and vehicle for the Bank to implement the U.N. Millennium Development Goals (MDG). The World Bank committed to achieving the goals, placing the MDGs at the center of its poverty reduction efforts.

Wolfensohn also committed to increasing engagement with disenfranchised communities such as impoverished youth, the Roma and those with disabilities. He also took steps to help make HIV/AIDS treatment affordable.

Remembering James Wolfensohn

The impact of global poverty reduction efforts that James Wolfensohn spearheaded will forever remain. According to Wolfensohn, “If we want stability on our planet, we must fight to end poverty.” His powerful statements on global poverty will guide future poverty reduction efforts of the World Bank.

Andrew Eckas
Photo: Flickr

the debt crisisBefore the COVID-19 pandemic, the poverty rate was expected to drop to 7.9% in 2020. But, according to the president of the World Group Bank, the pandemic may cause more than 1.4% of the world’s population to fall into extreme poverty. Since March 2020, these countries have seen lower export prices, less capital and remittance inflows and shrinking tourism revenue. Many low-income countries are facing limited resources and weak institutions that prevent them from supporting their economies. Furthermore, the debt crisis has only worsened the economic situation of developing countries during COVID-19.

The Global Debt Crisis

Half of low-income developing countries entered the pandemic with high public debt. The U.N. hoped to raise $10.19 billion to help the poorest countries during COVID-19 but only managed to raise $2.8 billion. With 150 million people threatened to fall into extreme poverty, experts are worried about the long-term economic effects of the debt crisis.

The debt crisis is becoming increasingly more destructive in many countries. The borrowing of money is occasionally controversial because citizens are not always aware of the purpose of a loan or its terms and conditions.  Sometimes these loans are used to benefit a small group of people in the country. In 2020, low-income nations were expected to pay at least $40 billion to service debts. The 76 countries with the lowest incomes owe at least $573 billion in debt. These economies are forced to handle massive amounts of debt while facing rising domestic demands, dwindling tax revenues and shrinking economies.

Consequences of Defaulting on Debt

Failure to repay a debt, including interest or principal on a loan, is called debt default. According to research from the International Monetary Fund (IMF), waiting to restructure debt until after a default is associated with larger declines in GDP, investment, private sector credit and capital inflows. Several studies have suggested that debt crises result in a substantial drop in economic growth. For example, failure to repay debts will decrease a country’s rating. Debt defaults affect a country’s ability to borrow money, exclude countries from international capital markets and increase borrowing costs.  Furthermore, since international debts have to be paid back in the creditors’ currencies, it could force governments to mine their natural resources to generate hard cash, thus continuing harmful environmental practices.

The Debt Service Suspension Initiative (DSSI)

The World Bank has proposed a new idea for countries suffering from “unsustainable” debt. The Debt Service Suspension Initiative (DSSI) is a tool that global institutions have created to stave off the debt crisis, which would allow countries to pause debt repayments to creditors interested in participating. According to The New Humanitarian, if all eligible countries join the initiative, it will free up approximately $11 billion for social spending by governments. Those who sign up for the DSSI will be expected to open its books, reveal its debt and refrain from taking more commercial loans on the side. Debt intervention for the poorest countries is, however, not a new idea.

The debt crisis affects a wide group of people, many of whom already face extreme poverty. The Debt Service Initiative may be expanded at future World Bank meetings. According to analyst and executive director for global policy, David McNair, “Countries need money now to respond to the pandemic and the quickest way to do that is to basically stop debt repayments.”

Pausing Repayments to Prioritize Pandemic Recovery

The debt crisis demands attention, especially as the COVID-19 pandemic interferes with access to resources while highlighting weaknesses in developing countries’ institutions. The World Bank is focused on using a new initiative to pause repayments in hopes of freeing up money for social spending. The initiative will also steer countries away from the consequences of debt default, such as declines in investments, capital inflows and lowered ratings. The goal is to see leaders in developing nations using the pause from payments to access resources necessary for solving prominent issues in the country.

– Rachel Durling
Photo: Flickr

Lack of Skilled Workers in Vietnam
In Vietnam, skilled laborers are a commodity. Only 12% of Vietnam’s 57 million workers are highly skilled. The Vietnamese Government decided to enter into a socialist market economy in the late 1980s. It aimed to mitigate the sluggish economy’s failure to meet goals. Still, there is a lack of skilled workers in Vietnam specializing in IT and other high-tech sectors to allow the economy to flourish. However, the World Bank drafted a new higher education plan in April 2020. The Higher Education Reform Agenda (HERA) sought to stimulate development in areas that Vietnam’s former education plan missed.

Lack of Skilled Workers in Developing Countries

The lack of skilled workers in Vietnam is not a new problem. One-third of the working-aged population in low- and middle-income countries are not skilled enough for a higher paying job. The lack of skilled workers keeps these countries stuck in poverty with people earning less income and enduring poorer living conditions. Vietnam was once one of the poorest countries in the world after recovering from 30 years of war. It is now a lower-middle-income country despite having a higher education enrollment rate lower than most other ASEAN (Association of Southeast Asian Nations) countries.

Vietnam’s Growing Economy

Vietnam’s GDP has been growing steadily, increasing by 7% in 2019. Furthermore, Vietnam is soon to be one of the fastest-growing economies alongside India and Bangladesh. In Vietnam’s race for growth between 2002 and 2018, the country’s GDP per capita increased by 2.7 times, surpassing $2,700 in 2019 and 45 million people left poverty. Vietnam has been encountering major successes that promise better living conditions in the future. Still, the country has work to do. The lack of skilled workers in Vietnam remains dire. With the proper education and training, people can benefit from more employment opportunities, higher incomes and improved standards of living.

HERA Takes a Step Toward Improvements

Acknowledging Vietnam’s need for an economic boost, the Vietnamese Government drafted the Higher Education Reform Agenda (HERA) in 2005. According to the HERA, the country would improve higher education between the years 2006 and 2020. The HERA projected goals that included hitting 45% higher education enrollments by 2020, employing 35% of academic staff with a doctorate degree in comparison to 15% and providing funding for university research.

Though experts in education and economics deemed the HERA overly ambitious and without structure, it had some success. The World Bank observed mostly substantial improvement in higher education by 2015. For example, in 2005, HERA sought to hire 60% of tertiary education teachers holding a master’s degree and 35% of teachers with a doctorate. Although the number of teachers with a doctorate had barely increased from 23%, 59% of tertiary teachers had a master’s degree by 2016.

Strategy to Improve Higher Education

In April 2020, the World Bank created a report outlining specific goals to increase Vietnam’s universities’ production of human capital. The report, entitled “Improving the Performance of Higher Education in Vietnam,” drew up specific goals for Vietnam’s universities to reach by 2030 using success stories like the state of California, the U.K. and South Korea. With implementation, the report will create a universal focus across bank and government entities to improve funding, enrollment and equity.

The plans involve increasing the number of applicants, improving the curriculum, creating structured application processes to accept more talented students, funding research more and being more inclusive towards ethnic minorities and lower-income Vietnamese students. The report addresses establishing links with industries and the private sector earlier on in students’ higher education. This would occur by providing internships and partnerships between students and companies to ensure relevant, proficient skilled work results.

The government still has a lot of work to do regarding the lack of skilled workers in Vietnam. Fortunately, plans are underway to invest in greater human capital. With better coordination between its market, government and educational forces, Vietnam will soon effectively produce workers qualified enough to boost the economy.

Alyssa Ranola
Flickr

Aid Poverty in MozambiqueThe country of Mozambique, located in southern Africa, has 46.1% of its population living below the poverty line. Children living in rural areas are among the most impacted as poverty in Mozambique hits rural areas the hardest. Economic growth has occurred in the country over the last decade but rural poverty persists due to meager transport infrastructure ultimately segregating rural regions. However, a new initiative is underway to help aid poverty in Mozambique.

The Integrated Feeder Roads Project

Funded by the World Bank, the Integrated Feeder Roads Project is an ongoing initiative that is enhancing road access in selected rural regions of Mozambique to support the well-being of local communities. For Mozambique and its segregated rural regions, added transport infrastructure that the Integrated Feeder Roads Project provides will connect these poverty-stricken rural regions to greater Mozambique. As a result, poverty in Mozambique is set to improve through imports, exports and overall improved levels of accessibility to and from rural regions.

Cyclones Strike

In 2019, the powerful Cyclone Idai and Cyclone Kenneth ravaged their way through the Southern Hemisphere and Mozambique was one of many countries deeply affected. Cyclone Idai was deemed to be one of the worst natural disasters to ever hit southern Africa over the last 20 years. Only six weeks later, Cyclone Kenneth hit Mozambique, marking the first time that two strong tropical cyclones struck the country in the same season. The aftermath of both cyclones was devastating, and in the destruction, the already minimal roads connecting rural regions were further damaged and relief efforts from humanitarians became nearly impossible. Poverty in Mozambique worsened after these cyclones and so did the transportive means of aiding it.

The World Bank Helps Aid Poverty in Mozambique

The Integrated Feeder Roads Project was initially approved by the World Bank in 2018 as Mozambique’s transport infrastructure has long been insufficient to sustain steady economies in rural areas and support local communities. Following the cyclones and the damage they left behind, the World Bank approved an IDA grant of $110 million to further aid reconstruction efforts given the severe aftermath of Idai and Kenneth. Overall, the World Bank is financing the Integrated Feeder Roads Project with an estimated total of $185 million.

COVID-19 in Mozambique

As if Mozambique had not endured enough, COVID-19 has been yet another unfortunate obstacle thrown at the country in its rebuilding process after the cyclones. Negatively impacting poverty, Mozambique’s economy has further declined as a result of COVID-19 due to travel restrictions and precautions affecting the flow of goods and services. Transport infrastructure built from the Integrated Feeder Roads Project will aid relief efforts and boost the economy even though COVID-19 is impacting poverty relief efforts.

The Future of Mozambique

In the face of much adversity, the Integrated Feeder Roads Project offers plenty of hope for poverty relief success in Mozambique. Added transport infrastructure will connect rural regions to greater Mozambique, and in a time of heavy need, these opened connections will help rural communities and affected individuals who desperately need it. Overall, foreign aid will help aid poverty in Mozambique.

– Dylan James
Photo: Flickr