 Welcome to everybody and welcome to the 22nd webinar series on the economics of COVID-19. I'm Isabel Lara and I'm a master student at SOAS, studying international finance development and we demo the rating in the session of today. It's the last one of the spring summer season. However, there will be more webinars series from September onwards. So we will just have to wait a little bit and these series have been co-organized by the SOAS economics department and the SOAS Open Economic Forum. The topic of today is cushioning the effects of COVID-19 in the global south, the role of development finance and the global financial safety net. This topic will be presented by Stefanie Griffith Jones and by Ulrich Bolz. Stefanie is currently the financial market program director at the initiative for policy dialogue at Columbia University. She's working on global capital flows, especially reference to flows in emerging markets and micro-economic management of capital flows in Latin America, Eastern Europe and Sub-Saharan Africa. She rates proposals for international measures to reduce volatility of capital flows and for international financial reports. She has written a report that right now I'm going to put here in the chat box which all of you are going to be able to have access to it. It has been published from the Center of Global Development and Regis Maradona and José Antonio Campo have collaborated on this publication as well. Then Ulrich Bolz, he's a leader in economics at SOAS and founding director at the SOAS Center for Sustainable Finance. He is the lead author of the 2018 report commissioned by the United Nations Environmental Climate Change and the cost of capital in developing countries and he has acted as an advisor to several governments, central banks, international organizations and development agencies. Ulrich will focus on the financial safety net and the issues related to debt and then Stefanie, who will talk first, she will address the role of development banks and development financial institutions. So whenever you are ready, you can start. Well thank you very much and can everybody hear me? Is it okay? Thank you very much to Ulrich for the invitation. I'm delighted to, I think, I think it's a bit of interference. I think those people who are not speaking it's better if they can turn off the sound if I may suggest that. So I will speak first basically about the increasing role, the sort of renaissance we can say, of development banks and public development finance. As many of you know in the times of the Washington Consensus there was a belief in so-called private efficient financial markets and the role, if you like, of the invisible hand in the private financial sector. But particularly since the global financial crisis of 2007 and 2009, it has become very clear that private financial markets on their own are very insufficient to finance development. In the first place they are very prosyclical or we can call them fair weather friends. So when things are going very well they're very happy to fund both domestically and internationally countries and companies. But when there are problems and when there is uncertainty, like there was in the global financial crisis, but also as there is now under COVID, they withdraw funding. And therefore one of the key roles, and I will go into a little bit more detail into it afterwards, one of the key roles that development banks played during the global financial crisis and they're beginning to play now under COVID is to provide counter cyclical finance, which is much needed in difficult times. But private financial markets have also other problems, other market failures we can call. One is that they don't fund SMEs or small companies enough and particularly they don't fund innovative companies, which have for example very good ideas but haven't got accumulated collateral or wealth. And also they don't provide long term finance because for example to build the infrastructure that is so key for developing countries and emerging economies, but also in richer countries you need very long term finance and they are not very willing to provide the so-called patient capital. So there's a number of market failures, but going beyond market failures there is a need particularly today to have a very radical transformation of the economies so that it can become greener and more inclusive. And in that sense financial markets are not very good at providing this kind of transformation of finance because they don't like to take too much risk, they don't like to innovate. And therefore already historically many of the most successful countries worldwide, both developed and developing, have relied increasingly on development banks. We have the case of China in developing countries and South Korea for example, we have Germany and France in Europe and so it's very interesting that increasingly both developed and developing countries are creating additional development banks. Today in Europe practically there is no country that doesn't have a development bank and I have just recently in the last month heard that there are development banks being created in Ghana and there's sort about creating a new infrastructure development bank in India. So there is a real renaissance, a rebirth of development banks because as Joe Stiglitz would like to say when the invisible hand of the market fails, maybe because it isn't really there, we need to move to the visible hand of government. Now what was interesting is that after the global financial crisis both national and multilateral and regional development banks sharply increased their funding. And also the largest multilateral development bank, the European investment bank, first had its capital doubled by its member states and then it played a key role in what was called the Yunker plan, which has generated, mobilized about 500 billion euros in five years. At the same time in Asia two major new development banks, regional development banks or multilateral development banks were created, the Asia investment infrastructure bank and the new development bank or the BRICS bank. So we have, I think from a more theoretical point of view, you're like a sort of shift in the development finance paradigm where we have a more balanced public-private mix between public banks, public development banks owned by governments, although they may fund themselves on the private capital market but owned and led by governments and the private commercial banking system. In some ways this was also the characteristic after the Second World War where we had this kind of balance of this development finance paradigm that combined the best of the public sector and the best of the private sector. And in fact, according to figures from the recent figures from the African finance, I'm sorry, from AFD, the French Development Bank, there are now more than 400 development banks in the world. I'm thinking now about multilateral, regional, national and subnational and their total assets reach over 11 trillion dollars, which is actually very large because it's equivalent to about 70 percent of the entire US banking sector. And each year these development banks worldwide commit over 2 trillion dollars, which is equivalent to 10 percent of the world gross fixed capital formation. So it's actually a very large number already and some of us think that they should be increased. And they perform five crucial roles. The first one is a counter-cyclical role which compensates in part for the pro-cyclical nature of the private lending. And for example, according to World Bank data, national development banks between 2007 and 2009, that is the worst of the global financial crisis, increased their lending by 36 percent while private banks were increasing it far less. And also, as I pointed out, the regional and multilateral development banks were also increasing the commitments and their disbursements very significantly. And this, and this is important to stress, was facilitated by significant increases in their capital, particularly the developed countries put money to increase the capital. And this is important because at the moment there is no such commitment, for example, from the G20, which are the largest economies of the world. And therefore, the response that, for example, the African Development Bank or Inter-American Development Bank can make to the COVID crisis will be insufficient if this is not changed because they will have limited headroom to increase their operations. So they're doing a very good job, as I will mention in a minute, but they are limited by the restrictions on capital. And this is actually absurd because if you increase capital, for example, in the case of the European Investment Bank, it was doubled by 10 billion euros about 10 years ago. And that generated additional lending, both by the bank and by the private sector through co-financing and other mechanisms, about 180 billion. So there's important leverage which can be achieved. And it's a good way for governments to spend their money. So that's the first role is the counter-cyclical role. The second one is to fund innovation and in general to support structural transformation. So we need, we have an urgent need, now we have two urgent needs. First, we have to help countries and economies recover from this terrible COVID crisis, which of course in the developing world is threatening major setbacks. It's estimated in Latin America that the setback would be 15 years of achievements in the social and economic sectors could be setback by COVID. So there is recovery from COVID. And then there is, as I mentioned, the structural transformation urgently to make the economy much more low carbon worldwide. And also to make it more inclusive because we know that there is growing inequality. But it's very important that such major transformations always require major investments and of a very innovative kind. And therefore the need for development banks is much greater for both reasons, both for COVID reasons, but also for achieving this major structural transformation. And just to finish, there are three other functions that I would like to mention that development banks have been fulfilling very well. One is to help with financial inclusion, particularly for example by lending to SMEs, smaller companies that have so much trouble getting private finance. Also by lending for long-term infrastructure, because often private sector finance is not available, particularly in poorer countries, particularly in riskier sectors. And finally last, but perhaps most importantly, is to support global public goods and particularly mitigating and adapting to climate change. So we did a book with my colleague and friend, Antonio Campo, and there we evaluated development banks in seven countries, Germany, China, and five Latin American countries. And we concluded that development banks seem to be very successful at what they do, that they are very flexible, they can adjust to new challenges, that they are a useful policy instrument to help overcome these major market failures. And in fact, one of the problems of the Washington Consensus Model was that governments had very few instruments. They could say, oh, we want to achieve this target, but then they didn't have any specific instruments to achieve it. And development banks are precisely such an instrument. They are very helpful for countries that have clear national development strategies, because they can help fund them. And particularly now, given the commitments that countries are doing in the context of the Paris Agreement on climate change, they can support key new sectors like renewable energy and energy efficiency. And I think here I would like to mention the case of solar energy, which was started by one of the most successful development banks, which is the German KFW, which started practically on its own funding solar energy, and then gradually encouraged, seduced the private sector to start doing so. And then that was followed or in parallel by the China Development Bank, which is the largest development bank of all, has two and a half trillion dollars of assets. And that made a major contribution towards developing solar panels and making them very cheap. And then of course, this had really an international externality, because this cheap solar panels have been then introduced throughout the world and made solar energy very competitive. So the work, if you like, that the KFW in Germany and the China Development Bank did in China, have had these massive externalities. So it seemed to us in this book and in later studies that it is a very key thing that governments can do, which is to expand developing development banks where they have them, or create new ones if they don't exist. And of course, improve them as much as possible. Now I want to very briefly talk about the response to COVID. And COVID, of course, is a major crisis. It's a bigger crisis in terms of the impact on development or most economists estimate. And it may have more damage on unemployment and poverty and setting back growth. And one of the major things in the short term is that there is a massive need for liquidity of companies, and therefore saving both companies and saving jobs. As well as continue with this aim of medium term transformation, what has become called in the development bank world, build back better. And so the development banks, I think have responded very efficiently. We've started to study that. One of the things they have done is they switched because normally they provide long term patient capital 15, 20 years, but they realized that the needs of companies were mainly for working capital. And so they have quickly developed instruments that provide very significant amounts of working capital, short term capital, often conditional, for example, the Brazilian Development Bank on these companies maintaining jobs and not firing people and not cutting salaries. Another thing is that they've been very good at fast tracking their procedures. And some banks, including, for example, the one in Berlin where Uli is at the moment, actually is able to disperse within 24 hours. And a number of other banks like the China Development Bank are doing that. They've also been very active in, for example, promoting key sectors like the health sector. There's a lot of activity of development banks supporting crucial elements. And finally, they have also done standstill elements. This links a bit into the issues that Uli will refer to in a minute, which is to they have been automatically rescheduling debts and postponing debt service payments to give more breathing space to companies. Now, with Regis Maradon from ALD and Jose Antonio Campo have written this piece that you have kindly put on the chat. And we argued in that piece that if development banks increase their transactions this year by 20% from their $2 trillion, which is their normal level, that could generate an additional $400 billion. And if you think about a lot of it would be co-financed with money that could be channeled from the private capital markets or private banks or private investors, you could generate at least $800 billion. You have a leverage of two. And that would be a major contribution to the gaps and needs both of developed emerging and developing countries. But as I mentioned before, the ability to do this would require some increase of capital, as was done after the global financial crisis. And this would be extremely important. I should also mention that there will be a major summit in mid-November, which was supposed to be in Paris, but it's going to probably be virtual, where all the development banks will convene for the first time under the leadership of French President Macron and also the UN Secretary General. And hopefully, this summit will help promote further and improve the performance of development banks. If I have one minute, I would like to just say that though I'm a big fan of development banks, I think there is now one limitation emerging, which is that more conservative, super pro-market people who have been in the past very critical of development banks now tend to accept them, which is a positive step. I think the World Bank used to be very critical. It sort of forgot that it was a development bank itself. I have started seeing them mainly as mobilizers of private finance. And the World Bank has this discourse, for example, that we should convert billions to trillions. Now, to achieve that, they want to use instruments that will give maximum leverage, which is fine to give a lot of leverage because you would mobilize more money, but they want to give maximum guarantees to take away what they call de-risk the private sector. To encourage the private sector to invest more, they want to assume all the risks on the public sector development banks' books. And if, of course, the development banks have future losses, they will be the taxpayers, they will be first the government, but indeed the taxpayers who will pay it. So I think one should be very careful of this. And also, if they use such indirect and complex instruments, nobody will exactly see where the risks are. And development banks and governments will lose this very precious tool, which they have to a certain extent, because they will not be able to steer the resources towards the priorities of governments like low carbon economy, more inclusive economy. And this is, I think, quite a serious risk. So I welcome the fact that there is such increased support, there is such an increased renaissance of development banks, but I think we have to be very careful about the instruments which they use and the purposes to which the funds are channeled. Thank you very much. And I will look forward to Uli's presentation and to your comments and discussions and questions. Thank you, Isabel. And great pleasure to speak after Stephanie. I hope you can hear me well. Very well. Okay, good. So as was mentioned at the start, I will cover the global financial safety net and also talk a little bit about debt, although probably I will not get very much into that because of time. So first of all, I very much agree with things Stephanie said about the role, the very important role of development banks, development finance institutions, and also her reservations regarding these billions to trillion's agenda and the associated problems. So it is very clear that the crisis has an enormous impact on the global economy and obviously then also developing an emerging economy. So I apologize that I will be talking kind of in general about developing an emerging economy. So I am not going to look into differences and of course there are big differences among this group, but so I will be a bit general and broad. But I mean all of them, speaking in general terms, have been hit by the shutdown of borders, collapse of tourism and international passenger travel, disruption of trade and investment, and indeed also the collapse of economic activity in the advanced countries, which are of course important export destinations. They have also been hit by crumbling commodity prices and contraction of remittances with the World Bank estimates to be around 20 percent down this year, and this is quite a significant amount around almost $500 billion that are missing because of that. Importantly, developing an emerging economies have also experienced large-scale capital outflows in March, April this year, and these are indeed the largest ever capital outflows, portfolio capital outflows on record. So there has been a lot of comparison between the current crises and the 2008 financial crisis, which also merged into a global crisis, but the speed and scale of capital outflows from developing emerging economies has been on a much greater scale and it has also led, for example, to impart large-scale depreciation of exchange rates. So there have been a number of countries, including Angola, South Africa, Shells, Zambia and Brazil, who have seen their currencies tumble by more than 20 percent. So the Brazilian Real even declined by 30 percent. So this obviously has important implications. By now, the situation has stabilized quite a bit, which is not least due to the large-scale intervention we've seen from central banks, both in advanced countries and in developing emerging economies. In early March, the financial markets of the major advanced countries were basically close to implosion. I mean, this is not an exaggeration that we're really close to completely collapsing and it was only due to massive interventions by the Federal Reserve, the ECB and other large central banks of advanced countries that kind of stabilized the situation. And it was also around that time that developing emerging countries experienced the largest capital outflows. There was really a rush out of these markets, partly because financial firms in advanced countries tried to remain liquid and survive and partly because of a higher risk aversion in developing emerging countries. So there was certainly an important role of central banks stabilizing their domestic economy and that certainly applies also to developing emerging countries where many central banks rapidly lower interest rates, an increasing number of emerging market central banks have also implemented now quantitative easing policies. So that's a novum, that was what beforehand only a number of advanced central banks would do. So we're in a completely new territory with this now. Importantly, there were also some actions by central banks, by the major leading central banks to stabilize the situation. The Federal Reserve Bank created swap lines. So that is basically it provided the opportunity to other central banks to exchange domestic currency to dollar and the dollar is of course the world's most important currency. The problem here is however that only initially a small group of advanced countries did these swap lines. So the ECB, the Bank of England, the Bank of Japan, Canadian, Swiss and they received these swap lines from the Fed and then with a bit of delay this was extended to a total of 14 countries but again this only included two emerging market economies, Brazil and Mexico, just showing that this kind of international support is only granted to a very limited exclusive club of countries and most by far the most of the developing emerging countries had no such lifeline to get liquidity when they needed it. And the crisis broadly speaking has shown how shaky the current international global financial safety net really is. So this global financial safety net, it's not a formal safety net but it's a kind of an assembly of different layers. So that involves foreign exchange reserves that national central banks are holding as a kind of war chest if they need to to stabilize their currencies or need to intervene in foreign exchange markets. Then these bilateral central bank swap lines of which the ones with the US Fed are arguably the most important ones but there are other ones People's Bank of China has extended swap arrangements with quite a number of countries and then importantly there is the International Monetary Fund which is kind of the provider of liquidity on the global level and then we also have a group of regional financing arrangements such as FLAR in Latin America or the Trans-Pacific Multi-Lateralization in Asia which are also supposed to provide liquidity in crisis situations to countries. Now the problem is that the availability of funds of these different layers is much smaller than the needs we see in a crisis situation that we have seen just now. So the IMF and Yungtang have estimated that liquidity needs amounted to around 2.5 trillion dollars. Roughly speaking these different layers of the global financial safety net add up to around 1.5 trillion dollars but only about two thirds so about one trillion would be available to developing emerging countries. So we have a bit of a mismatch between what is available within this global financial safety net and the potential needs of crisis during a truly global crisis but then there's also the question around the concerns under which these funds are available and so for example the support from the IMF usually is only available under fairly strict conditionality. The fund has responded in a very pragmatic way I would say this time trying to provide as much as liquidity as possible but arguably there could have been much more and I have definitely mentioned already that in the 2008 crisis the G20 kind of emerged as a leading force in trying to stabilize the global financial markets and supporting the world economy. This time we also had some big declarations so for example the G20 in April had a meeting where they issued a statement where they promised to do whatever it takes to use all available policy tools to minimize economic and social damage from the pandemic, restore global growth, maintain market stability and strengthen resilience. However the the concrete steps that were taken were rather disappointing so there was an agreement to double the emergency facilities from of the IMF to a hundred billion dollars so this is important there has been a hundred billion dollars that could go out to mostly low income countries at low conditionality but that was meant for countries with very strong policies and fundamentals. The G20 also agreed on a temporary debt standstill for 2020 which again was important but arguably not enough and I'll get back to that in a moment and that applies only to public debt and but in terms of providing a big liquidity boost to the world economy and developing emerging countries in particular the G20 has not delivered and this stands in contrast to the response that we've seen after from the G20 in 2009 during the global financial crisis or North Atlantic financial crisis as some like to call it where the the G20 agreed on the issuance of 250 billion dollars of SDRs so SDRs are special drawing rides they are basically an international monetary asset that can be created by the IMF so the IMF can act as a kind of central bank for the world and create this new monetary asset. SDRs are based on a basket of currencies so it's the major the world's leading currencies including of course the dollar the euro the pound is still in there as well the renminbi has become a constituency currency of the SDRs some while ago and of course also the Japanese yen and the IMF has the authority to create unconditional liquidity with these SDRs so it can create this money and then this will be allocated to every member country so theoretically this would be exactly what we need right now now this boost of liquidity the problem however is that at least 85 percent of the the funds membership needs to agree on the issuance of new SDRs and the problem is that the largest member country of the IMF which is the US government has a 15 percent kind of it can block this because they have more than 15 percent so and this is exactly what happened during the spring meetings in April the the US basically argued that SDRs are not an effective tool and therefore blocked the issuance of new SDRs and so let me just give you the the quotation from the US Treasury Secretary Mewkin who argued that and I quote SDRs were not an effective tool to respond to urgent needs because almost 70 percent of an allocation would be provided to G20 countries most of which do not need and would not use additional SDRs to respond to the crisis by contrast all low-income countries including those facing urgent balance of payment needs would receive just three percent of the allocation and he is of course right that SDRs would be allocated according to the quotas that's basically the the share the member countries have with the IMF however close to two fifths of the IMF quota so the shares of the IMF are held by developing and emerging countries so two SDRs of newly created SDR would go to developing emerging countries and of course not all of them are in dire need of new SDRs but I would actually say many I mean most of them could really do well with the new SDR allocation even if it's only to boost their reserve holdings but moreover and this is something that I have put forward with colleagues including Jose Antonio Campo and Kevin Gallagher and Hayao we proposed an issuance of at least 500 billion dollars in March and we suggested that advanced countries and also emerging countries that do not need this SDR liquidity could provide it to the IMF so that the IMF could boost its own lending power and basically also increase its own liquidity provision to the world economy so there are ways of using SDRs to provide more liquidity unfortunately the US and India was the second country that opposed an SDR issuance were opposing that and the reasons seem to be rather petty so SDRs are unconditional every member of the IMF gets it which also means that countries like Venezuela and Iran or Pakistan would get an SDR issuance and this may not be in the direct interest of the US or in the case of Pakistan, India and so in a way a very elegant solution to providing more liquidity to the global economy has been made impossible because of rather narrow interest from countries and I would argue that there still is a very strong case for issuing new special drawing rights and so the European countries for example which have been all very positive I think they should be putting forward a proposal for a mechanism how they would reallocate their SDRs to basically negate Newton's official reasons for opposing it so we're moving ahead with time so I will finish very soon I'll just make a few comments on debt already before the Covid-19 is hit the IMF and the World Bank which are doing regular assessments on debt sustainability so of public debt of developing emerging countries they came to the conclusion last autumn that around half of all low income countries were considered in or they were considered in debt distress or at high risk of debt distress and more broadly around 60 developing and emerging countries have been facing issues with debt sustainability so even before the Covid crisis hits there was a developing debt problem in the emerging world and now of course with Covid having hit them these countries very hard and also having created the need for large-scale fiscal stimulus I mean wherever large-scale was possible and we can see that developing emerging countries have had more timid fiscal response compared to advanced countries because basically they have limited fiscal room but this obviously will further create problems regarding debt sustainability we did mention already that there is a temporary debt standstill for debt to official creditors so that's basically the G20 countries and public institutions but this applies to 77 of the poorest countries but there are still discussions going on about including the private sector and so there are this is this is an area that needs urgent attention much more effort to solve this problem and it also I think is a good reminder that we urgently need to develop a proper sovereign debt restructuring mechanism this has been in discussion for well 30 years at least but there has never been really an agreement on putting this into practice and I do think we urgently need to work on such a debt restructuring mechanism I think in the face of the climate crisis we also need to have discussions about climate debt in such a discussion I'm not going into that now because that would take another well a couple of minutes would not even be enough but anyway so let me finish here but so I think even though the situation has stabilized to a certain degree now we are still facing severe problems on the fiscal side in the developing emerging world both with respect to shorter term liquidity but also structural issues around debt sustainability and this will will will have to be on the agenda going forward and I'll stop here thank you thank you very much both of you and now I'm going to to ask you some different questions that they have that people that have been watching us are asking okay so there are two about development banks Alex is asking about the world bank leverage and risk and it's for Stephanie so a recent ODI report on blended on blended blended finance looks at the leverage ratios for the EDA IFC and MIGA and they found leverage ratios between 1 and 0.7 one can assume these institutions to follow the world bank doctrine for maximizing leverage the question here is then how will development banks in your scenario mobilize private finance at a one-one ratio without radically moving removing the risks for the private sectors as the world bank advocates Stephanie you have to turn on your microphone so would you like me to answer that try and answer that question or do you want to give me the other question okay I can give you okay so the other question it's about the Wall Street consensus and development banks Marie is asking Washington sorry Wall Street or Washington Wall Street consensus okay and so she's saying that you mentioned in the end of your presentation the billions to premiums agenda and touch upon the consequence of that earlier in the series we heard from Daniela Gabor who spoke about this development and what she calls the Wall Street consensus and the shift in development finance to one of the risking development projects to attract private financial flows and feed the appetite of private investors do you believe this tendency will strengthen in the years to come and that development banks might fundamentally change because of it okay we're very very interesting questions I think I'll start with the second one um I'm actually a close colleague of Daniela Gabor and I broadly agree with her um maybe she's a bit more radical than me but that's always a good thing um I think there is a fight going on between more like Keynesian development economists who want to use development banks for what they were set up as vehicles to channel funds including very much private funds for development purposes and particularly now for purposes of greening the economy achieving a low carbon economy which is such an urgent task but also making more equal and also making these countries more dynamic so taking what I call economic risks you know the kind of risks that Mariana Masucato talks about in terms of taking risks in new technologies new products new regions which are good risks take and it's great the development banks take more risk when the private sector doesn't want but there's another kind of risk which I call a financial engineering risk which is in the design of the financial instruments and which are not desirable they have the advantage that they may sometimes create more leverage and therefore generate more resources and that's why the soul to governments is a good thing but they also take risks away from the private sector they don't de-risk they redistribute risk it's wrong to say that they de-risk because what they do they transfer the risk from the public to the from the private to the public sector and in some cases that's fine for example you have regulatory risk which is that the government for example an infrastructure project could change the rules of the game or that the public utility when it buys say electricity doesn't increase the price as much as was in in in the agreement of the initial contract for the investment therefore it's good for governments to step in and guarantee that but governments shouldn't take the commercial risk that's what capitalism is for and that's what capitalists are about they should assume the risk so I think there is this tendency of calling the risking but actually putting risk on the public sector balance sheets and I think there is a big argument about this and and I'm definitely on the same side as Daniela and many others Uli agrees and many others agree that we should use development banks for development I mean their main aim is to have maximized development impact and of course having more leverage is an important instrument for that but it must not be at the sacrifice of absorbing too much risk from the private sector I I hope that this will be and first needs to be understood because sometimes this is all hidden it's all a bit of pain behind these very complicated instruments financial sector is always very good at doing that it creates these very complicated instruments which itself doesn't understand and then they say no no no you can't give opinions because you're not experts but I think the underlying principles are clear and the work that academics and NGOs and others in the development community can make is very important I think for example in Europe there is a more cautious approach the European investment bank is also very keen on leverage but I have been studying it and talking to people there and my impression is that they have a more I feel like continental European approach more of German French approach and not this wild Anglo-Saxon approach of trying always to satisfy everything that the private financial sector wants so I'm I'm quite optimistic about about but but I think we need to remain vigilant I haven't read the ODI report on blended finance but I think this is on a different issue I think about how how the World Bank leverages its its funds also depends for example on how guarantees and other instruments are accounted for in terms of their capital and I think clearly the World Bank could leverage more for example the IFC has interesting instruments for leveraging but I think it is very important on how again blended finance is used because blended finance means using public public money and is it is it a good way to use public money for guaranteeing risks of the private sector or is it a better used for example give cheaper credit to small farmers and so on or to subsidize investment in the green economy so I think one would have to look at it very carefully how concessional resources within blended finance are used and and what are the specific mechanisms and what is the specific development impact that is always the key question to ask not the financial result of a development bank although it's important not even the level of leverage but the total development impact and the main risk for a development bank is is not to achieve enough development impact thank you thank you stephanie I have two other questions for you and one of them is that in the current india indian scenario mainly indicating towards the employment and massive financial and and liquidity constraints of the common people what role can be played by development banks directly or indirectly to support or help improve this this scenario okay can you hear me if you could very quickly repeat maybe it would be good because okay so this is about the role of development banks in relieving COVID-19 consequences in india so in the current indian scenario mainly indicating towards the unemployment unemployment and massive financial and liquidity constraints of the common people what role can be played by the development banks directly or indirectly to support or help improve this scenario thank you and then the other question is that it before you were talking about that some goods should be provided globally as for example health and how do you think that this can happen with the high level of public debt that each country is facing right now okay so I think on the first question of course I think we have to think about it in the broader context that it really raises because we have to look at all the policy instruments that say the indian government can deploy including monetary and fiscal policy international support that the india can get and development bank would play some role within that I think that in the time of the washington consensus unfortunately india used to have quite a good system of development banks but a lot of them have been shut down or diminished so the firepower which they have in terms of helping for the very important aims that were asked is a bit limited but I was very encouraged because I've been invited actually to a webinar next week where this is a little bit confidential maybe where there are serious studies of recreating some kind of infrastructure investment bank in india because they saw that the private financial markets weren't doing the jobs so I think you know the the less development banks you have or the smaller they are you can contribute less particularly in these moments of crisis when when a development bank can help so much in countries like Germany for example kfw in china it used to be in brazil although smaller but even a very conservative government in brazil is using the vendes quite significantly in the case of india they don't have such a big one and so they will have to recur more i think to direct fiscal policy monetary policy maybe financial regulatory policy to try and overcome the situation uh the second question i think is a little bit of confusion between public goods and high level of public debt public goods are are goods which where the social returns or the environmental returns are higher than the the commercial returns for example climate change so if you were thinking of avoiding climate change or limiting it to 1.5 degrees you would need to have a higher price of carbon than you do now internationally and while you don't you have to have direct interventions by governments or by regulators and then and therefore for example you can finance activities which would not be normally commercially profitable because the prices are distorted but but are very important from a public good point of view and this is a separate issue from the issue of high public debt but high public debt is very important because the fact that the developed countries are going to have by the end of the year debt to GDP according to the IMF estimates of about 130 percent of GDP and that levels of debt will also grow up in the developing countries because they need to expand economic activity may create future problems but at the moment i think the key issue is not debt because we can then think about how it can be forgiven or grown out of but the main issue is how to increase spending by governments to ensure that they are providing enough incentives to support employment and to support companies not going bankrupt and if i may come in here and i know we are running out of time but i just like to emphasize following up on on on these points which i fully share so we are of course facing right now this is a pandemic which is a terrible health crisis but we are also facing the climate crisis and the problem is we have around a decade left to fundamentally decarbonize our economies because otherwise we will not succeed really in limiting global warming to 1.5 centigrade or even 2. centigrade and scientists tell us that everything beyond two centigrade will really be catastrophic i mean two degrees will be bad enough and 1.5 degrees will also come with significant effects which we can already see to a certain degree so the problem is we need very urgent investment in decarbonization of our economies and having low carbon infrastructure especially energy infrastructure and so the big challenge is that we need to make sure that all the money we spend now in stabilizing the economy trying to get a recovery going needs to also take these very very important long-term goals into consideration and i think that actually is also one reason why we need to see an important role of public banks and development banks in particular because we don't have the time really to wait a decade to find completely market-based solutions to to to kind of get this change going and this is not to say that we don't want to have the market involved and of course we do need market mechanisms such as carbon pricing in a very meaningful way but we definitely need to also to have a hands-on approach using public banks to to to shore up investment and very importantly for many climate vulnerable countries there are already now very little possibilities to undertake the investment research we have done has shown that these countries actually face a risk premium already on borrowing money from capital markets so we need public support among others through the form of development bank intervention in getting the right investments into resilience into adaptation going so so just to back up uh on on on Stephanie's very good comments okay perfect thank you very much so we're basically done thank you very much it's Stephanie and to Sarah, Janice and Anne-Marie who have been organizing this amazing seminars and to everyone else who has contributed and thank you thank you very much bye