GOVERNMENT HAS been vindicated by the World Bank’s verdict that Russia’s invasion of Ukraine has added to pressures caused by the COVID-19 crisis which are affecting economies of countries worldwide.
President of the World Bank Group, David Malpass, who disclosed this recently, said the international financial institution is preparing a $170 billion package of financial help in response to the overlapping global crises of war, pandemic and inflation that are hitting the poorest countries, indicating that there was a need to provide assistance quickly to save economies.
According to him, $50 billion would be spent over the next three months, with a further $120 billion of financing provided over the following year under the proposal that will be discussed with the World Bank’s member governments at the spring meeting of the Washington-based organisation.
“I’m deeply concerned about developing countries. They are facing sudden price increases for energy, fertiliser, and food, and the likelihood of interest rate increases. Each one hits them hard,” the British daily tabloid, The Guardian quoted Mr. Malpass as having told reporters.
The newspaper reported that the World Bank president said “dearer food and energy, higher interest rates, the war in Ukraine and China’s coronavirus-related shutdowns meant the global economy was now expected to grow by 3.2% this year, compared with the 4.1% it had predicted in January.”
Vice President Dr. Mahamudu Bawumia recently stated that the increase in commodity prices had been exacerbated by the Russia-Ukraine conflict, noting, “Here in Ghana, 60% of our total imports of iron ore and steel are from Ukraine. Russia accounts for some 30% of Ghana’s imported grains, 50% of flour and some 39% of fertiliser. So we are directly affected by the Russia-Ukraine war.”
According to him, Russia and Ukraine together accounted for nearly 30% of the global wheat trade, in which Ghana imported $43.4 million worth of wheat from Russia in 2019, adding that Russia’s military invasion of Ukraine led to global wheat prices shooting up, while Ukraine’s production ability has been compromised.
Before the Vice President could finish his presentation on the economy, the National Youth Organiser of the opposition National Democratic Congress (NDC), George Opare Addo, had gone to town asserting that Dr. Bawumia’s address on the state of the country’s economy lacked “substance.”
In a Facebook post, Opare Addo said, “Fixing an economy is not about speaking to theories in books, but very practical. The economic story of Ghana under Akufo-Addo/Bawumia can be summarised by a six-year-old child. It is a mess and Bawumia should not waste our time as a people. We know what he can do after almost six years of putting him in charge. He doesn’t deserve any response from any discerning mind.”
World Bank Response
The World Bank said the bank’s sister organisation, the International Monetary Fund (IMF), will downgrade its growth forecasts when it publishes its half-yearly world economic outlook on Tuesday.
“In a chapter of the outlook published ahead of its official launch, the IMF expressed concern about a buildup of private debt, which it warned could knock a cumulative 0.9% off growth in advanced countries and 1.3% off growth in developing countries over the next three years,” the paper stated.
“People are facing reversals in development for education, health, and gender equality. They’re facing reduced commercial activity and trade. Also the debt crises and currency depreciations have a burden that falls heavily on the poor,” it again quoted Malpass as saying.
“Food crises are bad for everyone, but they are devastating for the poorest and most vulnerable. There are two reasons. First, the world’s poorest countries tend to be food importing countries. Second, food accounts for, at least, half of total expenditures in household budgets in low-income countries, so it hits them hardest.
“The inequality gap has widened materially, with wealth and income concentrating in narrow segments of the global population. Rate hikes, interest rate hikes, if that’s the primary tool, will actually add to the inequality challenge that the world is facing,” the World Bank president purportedly indicated.
He continued, “We’re preparing for a continued crisis response given the multiple crises. Over the next few weeks, we’ll be discussing with our board a new 15-month crisis response envelope of around $170 billion to cover April 2022 through June 2023. We expect to commit around $50 billion of this amount in the next three months.”
The tabloid reported that both the World Bank and IMF are concerned about the number of countries having problems paying their creditors at a time of slowing growth and rising global interest rates.
Malpass said central banks should not rely exclusively on interest rates to tackle inflation. “Central banks need to use more tools under current policies,” he added.
Malpass said there is the needfor improvements to the common framework – a mechanism for helping countries with their debt burdens – which has been criticised for being too slow and too limited in its scope.
“Due to high debt and deficit levels, countries are under severe financial stress,” he said.