World Bank Development Finance Director Samuel Munzele Maimbo spoke with Nelson Naturinda about how the bank is helping regional economies weather global crises
There was an outcry over high commodity prices. Countries like Kenya, Rwanda and Tanzania have provided economic subsidies for fuel, but the World Bank is said to oppose them. What do you want economies to do to help their people?
Context matters. We have to consider the state of the world economy. Global economic growth has fallen from 5.5% in 2021 to 4.1% currently.
Covid-19 has destabilized the economies of developing countries which have lost a lot. In addition, the war in Ukraine took Ukrainian and Russian wheat off the market.
Any government considering a response must consider both short-term and long-term needs. The short term needs could be food and fuel and the long term needs would be education.
The World Bank’s position is that subsidies are effective if they are temporary or targeted. If you don’t make them work carefully, the risk of poor grant management is high.
President Yoweri Museveni has repeatedly told Ugandans that there will be no tax cuts or subsidies. Is he saying this under pressure from you financiers?
Our country-based model is to always put authorities first in deciding specific policies. What we provide is guidance on how to ensure that specific policy instruments are designed to work.
It is early, as food prices rise, to be definitive about the use of subsidies. It is much easier to get subsidies wrong than to correct them, especially in a complex environment.
But people are looking for short-term relief. What are you doing?
When the World Bank faces global problems, we provide global solutions. When Covid-19 arrived, we were looking for relief. Between April 2020 and March 2022, the World Bank gave developing countries $200 billion; $73 billion on highly concessional terms, plus $26 billion for technical assistance. We provided $17 billion for agriculture. Over the next 15 months, we will give approximately $170 billion to help countries deal with multiple crises resulting from the war in Ukraine. The key is that for us who have supported governments, governments must ensure that they are the last link.
Have any East African countries asked you for help because of the Russian-Ukrainian conflict?
Several delegations have recently come to the World Bank to express their challenges. The challenges in East Africa are quite similar to those in other parts of the region. One of them is the growing vulnerability to debt. The number of countries at high risk of debt distress has increased from 6 to 12. The war has caused rising food prices, energy prices and a slowdown in tourism.
Apart from Covid-19 and the war, natural disasters have not taken leave. These impact countries differently.
Our planned support of $170 billion aims to meet immediate needs and invest in the future.
Citizens are worried about the increase in debt. Aren’t you worried?
People are right to worry about the public debt. We cannot talk about development without talking about sustainable debt.
Are we worried? Yes we are. Globally, total debt to GDP has increased by more than 200%. Worry arises when you look at rising inflation, declining economic growth, rising food prices, energy prices, you are coming out of Covid-19.
What the World Bank has done is put in place a project called the Financing for Sustainable Development Policy, which will make countries talk about debt. The citizens, the government should know where they are. The pillars of transparency, fiscal management and debt management capacity apply.
If the debt is not well managed, when do you act?
As part of the sustainable debt policy, all shares traded are made public. It allows citizens and civil society to actively monitor what is happening and have the conversation with the government. We are not a global police. We provide support.
Uganda’s debt to GDP ratio has fallen from 41% to 50% and the government is taking action by having such a conversation.
Some countries in the region have reached 70% and have done nothing. There are countries that have a high level of indebtedness, but they are viable because their revenue generation capacity is high. Every situation is different.
What is important for the World Bank is that you have this conversation and that you are honest with yourself as a country.
Samuel Munzele Maimbo is the Director of the Resource Mobilization Department of the International Development Association and the International Bank for Reconstruction and Development at the World Bank.
Mr. Maimbo joined the World Bank in 2001.
Prior to that, he was a Bank Inspector at the Bank of Zambia and Auditor at PricewaterhouseCoopers.
He holds a PhD in Public Administration (Banking) from the University of Manchester and an MBA in Finance from the University of Nottingham.