THE President of the World Bank Group, David Malpass, has warned of global recession in the midst of the Russian-Ukraine war that has threatened food and energy.
Malpass issued the warning during a virtual chat titled, ‘The Way Forward: A Conversation with David Malpass and Masood Ahmed,’ which was held on May 26, 2022, and monitored by The ICIR via YouTube.
He said, “There would be recessions in some countries, maybe many countries. The variables are how long is the war lasting with Russia and how does the world respond in terms of supplies. I am concerned about interest rate increases because we are running at a higher inflation rate. There are slowdowns in China and Europe and it is affecting developing countries.”
Malpass, who had an interesting chat with Masood Ahmed, President of the Center for Global Development, warned developing countries to stop subsidising energy, but to rather create safety nets for their citizens to thrive.
He said, “Economics is really clear that what you don’t want to do is put a cap on the price spike. You want to let the price go up and try to cushion the costs on people. Countries need to avoid export controls that block exports from leaving their countries.”
Ahmed, agreeing, stressed that subsidising gasoline prices was not a good idea, but advised that the gains should be used to help lower- income households deal with the costs.
The World Bank president expressed his displeasure with borrowing by many developing countries in Africa. He noted that one “bad practice” developed countries used to milk developing economies of funds was the use of non-transparent contracts. He accused many lenders of writing contracts with a non-disclosure clause that reduces accountability in the long run.
One of the lenders he fingered of using the clause was China, which he alleged began the process in 2014.
Economic and financial experts had warned the Federal Government recently that Nigeria risked losing key national assets to China in the event that it defaulted in paying back loans obtained from China, which is currently put at $3.48 billion
The experts spoke against the backdrop of the possible take-over of Uganda’s only international airport and other key assets over the East African country’s inability to repay a $207 million loan obtained on November 17, 2015 from the Export-Import Bank of China.
The loan has a maturity period of 20 years, including a seven-year grace period. According to the deal signed with the Chinese lenders, Uganda would have to surrender its only international airport after a default.
Not so long ago, Nigeria’s former Minister of Transportation, Rotimi Amaechi, hinted in August 2020 the possibility of Nigeria forfeiting its assets to China in the event of a loan default.
Amaechi reportedly said Nigeria had waived immunity on a loan, which means China could take the country to arbitration in the event of a default.