Fabio Panetta: Statement - meeting of the Development Committee
Statement by Mr Fabio Panetta, Governor of the Bank of Italy and Governor of the
Constituency of Albania, Greece, Italy, Malta, Portugal, San Marino and Timor-Leste, at
the 109th Meeting of the Development Committee (Joint Ministerial Committee of the
Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to
Developing Countries), Washington DC, 19 April 2024.
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The global economy has shown remarkable resilience in the face of numerous
challenges. Thanks to progress made in the battle against inflation, risks to the outlook
are more balanced, and a soft landing is now more likely. However, growth prospects
over the medium term remain subdued. An imbalanced recovery and the rise of
economic and political fragmentation could worsen the gap between and within nations,
hampering income convergence and the welfare of the poorest and most vulnerable
economies.
Against this backdrop, it is of paramount importance that the multilateral system and
international financial institutions make timely and decisive interventions. Opportunities
and risks associated with climate change, new technologies, demographic trends,
migratory pressures - combined with the need to preserve peace - are global in nature
and no country can cope with them alone.
The World Bank Group (WBG) is expected to contribute by establishing a new
multilateral approach to development. We acknowledge the work done under the WBG
Evolution launched in October 2022, and the progress made as described in the
Development Committee Paper "From Vision to Impact. Implementing the World Bank
Group Evolution." We agree that it is time to work on the Evolution agenda's
implementation, focusing on modernizing the operational approach, striving to act as a
one WBG, and strengthening the WBG's capacity to measure outcomes, including
integrating impact evaluations into projects and programs.
Under the recently approved Crisis Preparedness and Response toolkit, we welcome
the enhancement of the set of instruments designed to help countries plan in advance
and make funds ready for rapid deployment when crises occur. At the same time, we
urge the WBG to emphasize the benefits of investing in crisis preparedness and
prevention, recognizing that risk mitigation leads to future savings. Likewise, we call on
the Bank to continue supporting the analytical work of the G20 Joint Finance Health
Task Force (JFHTF), in close cooperation with the WHO, to improve the assessment of
social, economic, and health vulnerabilities and risks arising from pandemics, as well as
the mapping of financing gaps.
We support the WBG's renewed resolve to be a Knowledge Bank, one that is data
driven. We highly value knowledge sharing and peer learning and suggest leveraging
existing WBG knowledge hubs and building strong strategic partnerships. We reaffirm
our commitment to this agenda, recognizing the compelling need to narrow inequities in
access to knowledge and new technologies, particularly in Africa. Technical cooperation
is fundamental to helping countries build institutions and infrastructures as a
precondition for sustainable development. In this vein, Central Banks also play a role. One
such infrastructure is a fast payments system (FPS) that measures up to international
technical and regulatory standards and is ready to be interlinked with FPS in other
jurisdictions.
We commend management for the results achieved so far in implementing the G20
Capital Adequacy Framework (CAF) Review, launched under the Italian G20
Presidency, and confirm our commitment to a full and effective adoption of the CAF
recommendations. It has already brought an increase in the IBRD's lending headroom
to the order of $50 billion over a decade, and there is potential for further expansion.
Within the newly approved Framework for Financial Incentives, some shareholders'
commitment to providing extra resources through hybrid capital and the portfolio
guarantee platform will bring further support to IBRD countries. The work to clarify call
and payment procedures of existing callable capital will provide an important layer of
assurance to investors and credit rating agencies and create more space for a further
reduction of the equity to loan ratio. New resources should also originate from the
hybrid capital with private investors and targeted efforts to attract more private capital
into development projects.
We need to work together on the G20 independent review on the operations of the
vertical environmental and climate funds, with the aim to improve access and financial
leverage of these funds. We believe that this will be best accomplished with a greater
share of resources to be channelled through MDBs.
The International Development Association (IDA) must be at the center of the World
Bank agenda this year. We must work to ensure a successful IDA21 replenishment,
with an optimal mix of donor contributions, efficient use of IDA internal resources, and
effective deployment of funds. IDA will be key to putting low-income countries back on a
sustainable growth path and fighting extreme poverty on a livable planet.
We need to strengthen our focus on the root causes of fragility. Strengthening
institutions and developing a pluralistic and competitive local private sector will greatly
contribute to mitigating instability and preparing countries to transition out of conflicts
and fragility. IDA should deploy its suite of analytical and financing tools for conflict
prevention and remain engaged during conflicts. Overall, we reaffirm the
recommendations that we have laid down in the non-paper on Fragility, Conflict and
Violence in IDA21, together with other donor countries and the Africa, ECA, MENA and
LAC (Haiti) borrowers' representatives.
Job creation and business development across IDA countries is our North Star in
improving local opportunities, especially for the young. This should mitigate the drivers
of forced migration, while continuing to improve regional infrastructures, food security,
access to energy and health systems and pandemic preparedness. The International
Finance Corporation (IFC), working together with IDA, should allocate additional
resources to better support local companies and business associations.
The most recent CAF measures for IDA allowed us to smooth out the financial
implications of earlier frontloading, while also strengthening capital for the next cycles.
We look forward to future work to enhancing development impact and further optimizing
IDA's balance sheet.
Our constituency appreciates the central role of Africa and the partnership built around
IDA. Italy has embraced this same spirit with the Mattei Plan, a renewed approach to
development cooperation that revolves around the gradual agreement of goals and
targets co-designed with African countries. It will be rolled out in synergy with
international partners, in the areas of education and training, agriculture, health, energy
and water.
To embark on a path of sustainable growth, the African continent should also play a
stronger role in clean energy products' global supply chains. Italy fully supports the
"Resilient and Inclusive Supply-chain Enhancement" (RISE) initiative, launched in
October 2023, including with a financial contribution. Italy will work closely with the
World Bank to ensure a swift implementation of RISE during its G7 Presidency.
Above all, a successful IDA21 replenishment requires a collective effort from all -
donors, borrowers and management. The Italian G7 Presidency is actively supporting
and coordinating this effort.