Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We're join now on Bloomberg TV and Radio by aj Banga,
Speaker 2: the President of the World Bank, who was here with
Speaker 2: us in our Washington, d C studio. Thank you for
Speaker 2: your time. You obviously are joining us at a very
Speaker 2: tense moment in the Middle East, specifically as we have
Speaker 2: a lack of clarity as to whether or not the
Speaker 2: ceasefire between the US and Iran is going to be
Speaker 2: one that can last, and whether it will result in
Speaker 2: the lasting reopening of the Straight of Horror Moves, which
Speaker 2: is obviously critical for global energy flows and the economy.
Speaker 2: As a result of that, how are you considering the
Speaker 2: potential economic cascading ripple effects of if a Straight of
Speaker 2: Horror moves that may not be as free flowing as
Speaker 2: it was prior to this conflict beginning.
Speaker 1: So thank you for having me. And that's kind of
Speaker 1: the questions that's in everybody's mind. And we've got a
Speaker 1: Spring meetings coming up next week and I'm sure to
Speaker 1: be topic number one. The reality is, no one knows.
Speaker 1: The two dimensions are kind to solve ful one is
Speaker 1: the length and duration of the day, and the second
Speaker 1: is right now, while there is some kind of a ceasefire,
Speaker 1: you can make a guess, So what kind of damage
Speaker 1: has happened to facilities if the conflict were to restart,
Speaker 1: then what kind of damage continues to happen to energy
Speaker 1: production facilities is unclear. Those two dimensions are what payre using.
Speaker 1: We've got a scenario that says that if it comes
Speaker 1: to a ceasefire now and three to four months of normalization,
Speaker 1: we have some impact on growth, some impact on inflation,
Speaker 1: both on the wrong side. But if it comes back
Speaker 1: into a conflict and continues after that, and this becomes
Speaker 1: a six to eight month impact on before it normalizes,
Speaker 1: not the conflict but the downstream effects, and that's a
Speaker 1: very different impact on growth inflation. So that's how we're working.
Speaker 2: In And which of those risks, in your mind is
Speaker 2: greater right now on the growth side or on the
Speaker 2: inflationary side.
Speaker 1: Well, I would say if you were to in the
Speaker 1: emerging markets, where my focus is, if you are to
Speaker 1: focus right now, you should be more concerned about inflation
Speaker 1: because that's the immediate impact you're feeling of the disruption
Speaker 1: in all these supplies, whether it's oil or gas, or
Speaker 1: sulfur or helium, or fertilizer or downstream chemicals. But when
Speaker 1: you go out further and if you're managing to get
Speaker 1: that inflation under control, then the next big thing to
Speaker 1: do would be to worry about your growth again. But
Speaker 1: they're both important. I just prioritize inflation before I went
Speaker 1: chasing down the growth poth well.
Speaker 2: And it raises the question, especially for some of these
Speaker 2: developing economies, if they're feeling the effects of this, their
Speaker 2: room to respond from a fiscal policy perspective, how much
Speaker 2: ability to do that is there's necessary.
Speaker 1: Absolutely, So both the IMF and US and other institutions
Speaker 1: like ours are working through in what ways can we
Speaker 1: be helpful to these institutions, to these countries as they respond.
Speaker 1: So in our case, we have something called a Crisis
Speaker 1: Response Toolkit, which was launched over a couple of years ago,
Speaker 1: and what that does is ten percent of the undispersed
Speaker 1: balances or approved projects in a country, any project can
Speaker 1: be diverted for purposes of crisis management under the control
Speaker 1: of that country's finance ministry. So if you put all
Speaker 1: that together, you add in a few other projects where
Speaker 1: they could do this and other work we're doing across
Speaker 1: our emerging markets, twenty to twenty five billion dollars of
Speaker 1: liquidity could be made available very quickly to our clients
Speaker 1: if this continues into that other scenario of longer term
Speaker 1: and we're trying to see if you can get to
Speaker 1: another somewhere between fifty and sixty billion of capacity to help.
Speaker 1: Having said that, or make sure you understand one thing,
Speaker 1: which is, you know, what we do right now has
Speaker 1: to be done in a way in countries that it's
Speaker 1: targeted carefully and it's clearly temporary and transparent, because down
Speaker 1: these countries in the headroom to let's say, do a
Speaker 1: permanent fuel subsidy, much better than that is to do
Speaker 1: targeted subsidies to those who are the most affected in
Speaker 1: the poorer sections of society, preferably through digital distribution. Means
Speaker 1: many countries across the emerging markets, not just in India
Speaker 1: or parts of Africa, but many countries now I have
Speaker 1: digitized ways of being able to just you targeted benefits
Speaker 1: to people, and that kind of thing is what I'm
Speaker 1: referring to, rather than blanket subsidies.
Speaker 2: I also wonder about the effort you think, if at all,
Speaker 2: that the World Bank is going to need to be
Speaker 2: involved in simply reconstruction in the Middle East. I know
Speaker 2: there is a role to play specifically in the reconstruction
Speaker 2: of Gaza, but we're now looking at destruction in Lebanon.
Speaker 2: We've seen infrastructure damaged in Iran. How active do you
Speaker 2: expect you will have to get in the region as
Speaker 2: a whole.
Speaker 1: Well, we started as the International Bank of Reconstruction and Development,
Speaker 1: so reconstruction is what we do. I think Ukraine, that's
Speaker 1: the other one. Yeah, Gaza, Ukraine is much bigger in
Speaker 1: terms of dollar value than these other ones currently put together.
Speaker 1: Depends how far the Middle East goes. Remember that the
Speaker 1: richer countries in the Middle East are not going to
Speaker 1: need I help on monetary terms. They can certainly use
Speaker 1: our help in knowledge and expertise, but not monetary. In fact,
Speaker 1: they're great partners the other way for us. They put
Speaker 1: money into it us to help the developing word. But
Speaker 1: in Ukraine and Gaza and the like, it's a way
Speaker 1: and Lebanon it's very different. Yes, I presume that we'll
Speaker 1: have a role to play there. You know, we're actively
Speaker 1: involved with the Ukraine and Gaza anyway.
Speaker 2: And you mentioned a dollar value there, and I'd like
Speaker 2: to focus on that idea of this being lending done
Speaker 2: in US dollars, because there's a conversation now that if
Speaker 2: Iran is able to charge a toll in the straight
Speaker 2: up her moves, it may do so in the yuan
Speaker 2: rather than the dollar, and whether that precipitates a decline
Speaker 2: in the dollar that has been long called for and
Speaker 2: not necessarily materialized. Is the reserve currency. Is it your
Speaker 2: expectation that in even the nearer intermediate term the World
Speaker 2: Bank is going to be less doing less lending in
Speaker 2: US dollars or do you see that as overblown?
Speaker 1: Not really, But the last so many years we've been
Speaker 1: lending in two or three currencies, principally for actually the Euro,
Speaker 1: the yen, the pound, and the US dollar, and that
Speaker 1: mixes kind of strayed pretty stable over the years. There
Speaker 1: are some very little demand from countries to borrowing in
Speaker 1: other currencies. It could change. You never say never. But look,
Speaker 1: I've been back thinking a long time. And the thing
Speaker 1: about a currency is that you have to believe that
Speaker 1: it is fully predictable to you in the sense of
Speaker 1: no management of the currency beyond what's transparent. Nothing is
Speaker 1: predictable in currency. It can go up and down based
Speaker 1: on how markets think. But you don't want you want
Speaker 1: the country to be fully free and floating for you
Speaker 1: to know that it's a currency you would hold and
Speaker 1: trade and do business in. And I think that part
Speaker 1: is still very much a challenge for many other currencies.
Speaker 1: Could there be bilateral deals that happen, They're already happening,
Speaker 1: and that could happen, but that's not large enough to
Speaker 1: challenge where the dollar stands and sets.
Speaker 2: You talk about ups and downs and financial markets and
Speaker 2: something else that was a cause of great volatility even
Speaker 2: prior to the war with Iran. Beginning was concerned about
Speaker 2: the disruption that we're going to see from artificial intelligence,
Speaker 2: specifically in certain industries and in certain labor markets and
Speaker 2: demand for labor, especially as you're considering developing economies in
Speaker 2: which a lot of work has been outsourced that maybe
Speaker 2: susceptible to being replaced by artificial intelligence. How do you
Speaker 2: prepare the world for that, Well.
Speaker 1: The two topics, said, the first is the creation of
Speaker 1: jobs and roles in the developing world, which is actually
Speaker 1: one of the focus of our spring meetings, and there
Speaker 1: the issue is one point two billion young people in
Speaker 1: the developing world, are going to become eighteen years of
Speaker 1: age in the coming fifteen years. And right now those
Speaker 1: very same countries are projected to create four hundred plus
Speaker 1: million jobs. Now these are focus economists. Make them people
Speaker 1: like us. You should treat them with a pinch of salt.
Speaker 1: But it could go up or down, but not by
Speaker 1: eight hundred million. So the point is there's both a
Speaker 1: challenge and our opportunity. There is those people have productive jobs,
Speaker 1: productive contribution to society, hope and dignity. Then you get
Speaker 1: great markets for our future products, technology, intellectual property, you know,
Speaker 1: everything else. But if you don't, then you have instability
Speaker 1: and illegal migration. We're focused on changing that trajectory towards
Speaker 1: the positive by focusing on five sectors. Most of are
Speaker 1: actually not reliant either in global trade to be the
Speaker 1: most important thing, or for that matter, directly impacted by
Speaker 1: the kind of AI we are discussing, which is ERM
Speaker 1: and generational AI. In fact, the sector is we're talking
Speaker 1: about primary healthcare. Agriculture is a business for small farmers.
Speaker 1: These are things that can be benefited by what I
Speaker 1: call small AI, which is AI delivered at the edge
Speaker 1: with local compute. So illiterate farmer who is able to
Speaker 1: use a phone to point at the disease in the
Speaker 1: back of a plant and not know what the name
Speaker 1: is because she can't pronounce it, but it can tell her.
Speaker 1: This in secticide from your cooperative for twenty five rupees
Speaker 1: in Uta, Pradesh is your answer. That's useful AI. It's
Speaker 1: true of healthcare, it's true of education and so on.
Speaker 1: So the applications of this kind of AI will actually
Speaker 1: be great answers for the emerging markets. And that's the
Speaker 1: way to see this from the other lens as compared
Speaker 1: to only the lens of a threat.
Speaker 2: Thward to hearing more about that at the meetings next week.
Speaker 2: Ajay Bonga leading the World Bank and here with us
Speaker 2: in our Washington, d C studio, thank you so much
Speaker 2: for joining us.