Thank you, Your Excellency Samia Suluhu Hassan, for taking the leadership in organizing this important event. I was very interested in the remarks by the Presidents of Malawi, Zimbabwe, Zambia, Botswana and others.  I also want to the President of Mozambique for hosting several of us earlier this afternoon to discuss early warning systems and sustainable management of Miombo forests.

This conversation on the role of regional interconnections in integrating renewable energy at scale is critical in ensuring that the energy transition happens with the right balance of dependable supply, affordability, and environmental sustainability.

Southern Africa is generously endowed with renewable energy resources, an abundance of sun in Botswana, Namibia and South Africa, and hydro resources in Mozambique, Tanzania, Zambia and Zimbabwe. These resources are not evenly distributed and, therefore, enhanced regional integration to tap into each other’s resources can reduce economic and financial costs. Through deepened regional integration countries can become both suppliers and purchasers of electricity during times of excess capacity and when deficits occur due to the time of day, season, climate shocks and operational constraints. For example, the proposed Mega Solar Initiative which seeks to unlock about 5GW of renewable solar energy in Namibia and Botswana could also contribute to alleviate the power deficit in the region and make good use of hydro assets in the north of region for balancing and storing the variable renewable energy.

Increasingly, energy transition is underpinned by regional integration of power systems to enable clean energy resources to be harnessed at scale and greater knowledge exchange and leap frogging. Regional power pools in Africa are spearheading efforts to integrate national power systems and harmonizing regulatory and operational frameworks.

The Southern African Power Pool (SAPP) is one of the most advanced power pools not only in Africa but also beyond. Trading through the centralized market has been growing and members have been benefitting from the lower costs. Yet, there is substantial scope for much more trading and for members to realize more benefits from integration, and to ensure SAPP remains on the leading edge.

There are four potential important gains from increased regional power sector integration through renewable energies:

(i)           savings in generation and transmission costs of up to $42 billion until 2040,

(ii)          better management of variable renewable energy and seasonal imbalances,

(iii)         supporting decarbonization and resilience of the regional grids, and

(iv)         increasing grid densification to support and complement electricity access programs and the digital agenda.

Unlocking renewable energy and power trade potential requires a comprehensive approach, with parallel efforts at regional and national levels. Several key interconnections, across three corridors (East, Central and West), have already been identified by SAPP and require investments in the order of $2 billion. The World Bank along with the African Development Bank, and other cooperating partners is supporting SAPP to develop the Regional Transmission Infrastructure Financing Facility (RTIFF), an innovative financing mechanism aimed at unlocking current constraints and to crowd in the public and private sector financing required.

The World Bank Group remains committed to supporting Africa in promoting increased interconnectivity, decarbonization and access to electricity. This morning we launched SCALE, a new multi-partner initiative that aims to bring global community resources – including grants and concessional loans – to support greenhouse gas reductions in developing countries.  We also support faster debt reduction efforts for countries with unsustainable debt – this will free up vital resources for development and climate action.  

Our commitment to Africa is reflected in the current active portfolio of regional integration programs across the African continent in the amount of $19 billion, ranging from common infrastructure to building the joint capacity and systems for coordinated action on, among others, food systems, digital development, trade, and energy markets.

Our active portfolio of regional energy projects amounts to around US$6 billion, including US$ 1.2 billion in Southern Africa. We are keen to provide additional support. I note that this is in addition to our current portfolio of energy access operations which amounts to US$8 billion, and when completed, it will provide energy access to 75 million people in Sub-Saharan Africa.

In conclusion, I would like to reiterate the WBG’s commitment to supporting the innovative solutions that SAPP is developing to leverage private and climate funding.  Thank you and I look forward to a good discussion today.

Today the World Bank announced a new multi-partner fund that will pool funding from the global community — including donor countries, the private sector and foundations — for scalable pathways to greenhouse gas emission reduction. The Scaling Climate Action by Lowering Emissions (SCALE) partnership will provide grants for verifiable emissions reductions and expand the funding sources for global public goods.

 “Climate finance needs major new mechanisms that pool funding from the global community to accomplish actual reductions in greenhouse gas emissions across the developing world. SCALE offers a key non-fragmented avenue for the global community to take action on climate change,” said David Malpass, President of the World Bank Group. “The verifiable emission reductions created by SCALE and similar mechanisms will also be an important step toward building effective carbon credit markets.”

 SCALE will deploy Results-Based Climate Finance where countries receive grant payments for achieving pre-agreed, verifiable results, drawing on twenty years of World Bank Group experience in this area.

 SCALE will support countries to build a track record of generating emission reductions from impactful programs and policies that they can apply toward their national emission reduction targets. SCALE will also yield excess credits that can be offered in carbon markets with the potential to unlock additional private sector funding.

 SCALE will pool public and private resources to (i) channel additional funding to middle and low-income countries’ emission reduction programs; (ii) help bridge the gap between the supply of and demand for high-quality emission reduction credits by supporting large-scale climate investments; and (iii) help countries develop high integrity credits and enhance their access to international carbon markets.

 Social inclusion is embedded in the design of all SCALE programs. An associated fund within the SCALE umbrella – Enabling Access to Benefits while Lowering Emissions (EnABLE) – enhances the inclusion of marginalized communities and indigenous peoples in programs under the partnership through specially designed benefit sharing arrangements.

The shrinking value of the currencies of most developing economies is driving up food and fuel prices in ways that could deepen the food and energy crises that many of them already face, according to the World Bank’s latest Commodity Markets Outlook report.

In U.S. dollar terms, the prices of most commodities have declined from their recent peaks amid concerns of an impending global recession, the report documents. From the Russian invasion of Ukraine in February 2022 through the end of last month, the price of Brent crude oil in U.S. dollars fell nearly 6%. Yet, because of currency depreciations, almost 60% of oil-importing emerging-market and developing economies saw an increase in domestic-currency oil prices during this period. Nearly 90% of these economies also saw a larger increase in wheat prices in local-currency terms compared to the rise in U.S. dollars.

Elevated prices of energy commodities that serve as inputs to agricultural production have been driving up food prices. During the first three quarters of 2022, food-price inflation in South Asia averaged more than 20%. Food price inflation in other regions, including Latin America and the Caribbean, the Middle East and North Africa, Sub-Saharan Africa, and Eastern Europe and Central Asia, averaged between 12 and 15%. East Asia and the Pacific has been the only region with low food-price inflation, partly because of broadly stable prices of rice, the region’s key staple.

“Although many commodity prices have retreated from their peaks, they are still high compared to their average level over the past five years,” said Pablo Saavedra, the World Bank’s Vice President for Equitable Growth, Finance, and Institutions. “A further spike in world food prices could prolong the challenges of food insecurity across developing countries. An array of policies is needed to foster supply, facilitate distribution, and support real incomes.”

Since the outbreak of the war in Ukraine, energy prices have been quite volatile but are now expected to decline. After surging by about 60% in 2022, energy prices are projected to decline 11% in 2023. Despite this moderation, energy prices next year will still be 75% above their average over the past five years.

The price of Brent crude oil is expected to average $92 a barrel in 2023—well above the five-year average of $60 a barrel. Both natural gas and coal prices are projected to ease in 2023 from record highs in 2022. However, by 2024, Australian coal and U.S. natural-gas prices are still expected to be double their average over the past five years, while European natural gas prices could be nearly four times higher. Coal production is projected to significantly increase as several major exporters boost output, putting climate-change goals at risk.

“The combination of elevated commodity prices and persistent currency depreciations translates into higher inflation in many countries,” said Ayhan Kose, Director of the World Bank’s Prospects Group and EFI Chief Economist, which produces the Outlook report. “Policymakers in emerging market and developing economies have limited room to manage the most pronounced global inflation cycle in decades. They need to carefully calibrate monetary and fiscal policies, clearly communicate their plans, and get ready for a period of even higher volatility in global financial and commodity markets.”

Agricultural prices are expected to decline 5% next year. Wheat prices in the third quarter of 2022 fell nearly 20% but remain 24% higher than a year ago. The decline in agricultural prices in 2023 reflects a better-than-projected global wheat crop, stable supplies in the rice market, and the resumption of grain exports from Ukraine. Metal prices are projected to decline 15% in 2023, largely because of weaker global growth and concerns about a slowdown in China.

The outlook for commodity prices is subject to many risks. Energy markets face significant supply concerns as worries about the availability of energy during the upcoming winter will intensify in Europe. Higher-than-expected energy prices could feed through to non-energy prices, especially food, prolonging challenges associated with food insecurity. A sharper slowdown in global growth also presents a key risk, especially for crude oil and metals prices.

“The forecast of a decline in agricultural prices is subject to an array of risks,” said John Baffes, Senior Economist in the World Bank’s Prospects Group. “First, export disruptions by Ukraine or Russia could again interrupt global grain supplies. Second, additional increases in energy prices could exert upward pressure on grain and edible oil prices. Third, adverse weather patterns can reduce yields; 2023 is likely to be the third La Niña year in a row, potentially reducing yields of key crops in South America and Southern Africa.”

Concerns about a possible global recession next year have already contributed to a sharp decline in copper and aluminum prices. A Special Focus section of the report examines the drivers of aluminum and copper prices and explores implications for emerging market and developing economies that export these commodities. Prices will likely remain volatile as the energy transition unfolds and demand shifts from fossil fuels to renewables, which will benefit some metal producers. Metal exporters can make the most of the resulting opportunities for growth over the medium term while limiting the impact of price volatility by ensuring they have well-designed fiscal and monetary policy frameworks, the report highlights.

In fiscal 2022, the World Bank Group delivered a record US$31.7 billion in fiscal year 2022 (FY22) to help countries address climate change, a 19% increase from the US$26.6 billion all-time high in financing reached in the previous fiscal year. The Bank Group continues to be the largest multilateral financier of climate action in developing countries.

“In our last fiscal year ending June 2022, we provided a record US$31.7 billion to countries to identify and enable high-priority climate-related projects as part of their development plans.” said David Malpass, President of the World Bank Group. “We will continue providing solutions to pool funding from the global community for impactful and scalable projects that reduce GHG emissions, improve resilience, and enable the private sector.”

Financing for climate action in FY22—which covers July 1, 2021, to June 30, 2022—reached 36% of total Bank Group financing. This exceeds the target set in the Group’s Climate Change Action Plan for 2021-2025 to deploy an average of 35% of the institution’s financing in support of climate action.

IBRD and IDA together delivered $26.2 billion in FY22 in climate finance. Nearly half of that—$12.9 billion—specifically supported investments in adaptation and resilience. IFC, the private sector arm of the World Bank Group, delivered an unprecedented $4.4 billion in climate finance and mobilized an additional $3.3 billion from other sources. MIGA, the World Bank Group’s political risk insurance and credit enhancement arm, delivered $1.1 billion in climate finance.

As part of its ongoing effort to help countries integrate climate and development objectives, the Bank Group recently launched a number of Country Climate and Development Reports (CCDRs). CCDRs are a new core diagnostic to help countries prioritize the most impactful actions that can reduce GHG emissions and boost adaptation. A summary of the preliminary findings of these reports will be published in coming months to foster action-oriented discussion in the global community.

By Atem Thomas Ashu

Environmental Affairs editor

As the global food prices continue to escalate, the International Monetary Fund (IMF) has been updating the world on the crisis playing out in every nook and cranny of the world. Here below is an update of the situation published by the global monetary fund.

Estimating Financial and Fiscal Costs of the Global Food Crisis Against the backdrop of rising global food insecurity, a recent International Monetary Fund (IMF) paper estimated that higher food and fertilizer import prices will add $9 billion in 2022 and 2023 to the balance of payments of the 48 most affected countries. 

The war in Ukraine continues to affect food production and distribution amidst a worldwide food crisis already stressed by regional conflicts, climate shocks, and the pandemic. The IMF paper identifies 48 countries, primarily low-income countries in the Sahel and other parts of Sub-Saharan Africa, that are most affected because they face significant import price pressures or have portions of their populations experiencing acute food insecurity, as defined by the World Food Programme (WFP). From a fiscal perspective, the analysis suggests that $5 billion to $7 billion in further spending is needed to assist vulnerable households in these countries. 

An additional $50 billion is required to end acute food insecurity over the next 12 months. Although estimating the cost of the food crisis is difficult in terms of data availability and the multiple factors driving price hikes, the report attempts to quantify costs using three approaches: the impact of the terms-of-trade shock on countries facing higher staple and fertilizer prices, the budgetary cost of supporting the poorest households, and the financial cost of eradicating acute food insecurity. 

The first approach—approximating $9 billion in foreign exchange needs over 2022/23 for the 48 most affected countries—employs international price changes for five essential cereals and three fertilizers. The price differentials are applied to the latest (September) import volumes assumed to grow proportionately with real gross domestic product and compared to IMF end-of-2021 price forecasts as a baseline scenario. The analysis offers a few caveats, including that it is not assumed that import volumes respond to price changes in the short term but will react over time. 

Furthermore, the $9 million in financing linked with higher food and fertilizer prices does not account for other balance-of-payments pressures such as commodity (particularly energy) price changes and rising interest rates on borrowing abroad. The second approach uses the most recent food inflation data to estimate the $5 billion to $7 billion needed to compensate households living on less than $1.90 per capita per day in the 48 countries identified. The methodology assumes 6-month compensation and unchanged household budget allocation for food. The range of total fiscal costs reflects cross-country variation in inflation and represents 0.15 percent to 0.30 percent of gross domestic product. Estimates do not include how other price hikes, such as for fuel for transport and cooking, would need to be factored into increases in social spending. 

The third approach applies the WFP’s total annual operational cost of $22.2 billion to support 151.6 million people to the 345 million people now suffering from acute malnutrition or worse to arrive at the $50 billion figure associated with lifting people out of acute food insecurity for 12 months. The IMF report and accompanying blogs highlight that many of the 48 countries affected by the food crisis face several overlapping vulnerabilities and must receive further humanitarian assistance and concessional financing from development partners. Other policy responses include implementing effective public expenditure for emergency relief, facilitating regional trade and reducing food export bans, improving input access for food production and distribution, and investing in climate-smart agriculture.

In South Sudan, the high levels of acute food insecurity are causing a high level of hunger-related deaths as food insecurity reaches emergency (IPC Phase 4) outcomes, with famine (IPC Phase 5) outcomes likely by January 2023, driven by prolonged conflict and recurrent flooding (FEWS NET). A fourth consecutive year of flooding is expected to result in another year of livestock and crop losses as flooding continues based on forecasts for above-average rainfall amid already high river levels and highly saturated soils. Humanitarian food assistance deliveries continue to reach areas of great concern across South Sudan to mitigate widespread acute food insecurity, although they are reaching only 20 percent of people in need. 

The Famine Early Warning Systems Network continues to assess a credible famine (IPC Phase 5) scenario given the high proportion of the population likely to face significant food consumption gaps and their vulnerability to new shocks. Fangak and Canal/Pigi are among the areas of most significant concern for this risk of famine (IPC Phase 5). If flood severity exceeds that of 2021 or if conflict intensifies, restricting household movement and humanitarian access, famine could occur. Emergency (IPC Phase 4) reflects an already high level of hunger-related mortality in South Sudan (FEWS NET). 

Higher fertilizer prices could decrease cereal production by 16 percent during the 2022 cropping season (WFP). Fertilizer prices more than doubled from their levels a year ago in East Africa within 2 months of the onset of the war in Ukraine. This coincided with the 2022 primary season crop planting, disrupting farming operations. There have also been fertilizer price hikes region-wide, with fuel prices 17 percent to 75 percent higher in April 2022 than a year earlier. 

The steepest increases have been observed in Burundi, Ethiopia, Kenya, Somalia, and South Sudan and have limited farmers’ ability to use farm machinery and transport and will further reduce their ability to grow sufficient crops this year. The WFP estimates that cereal production during the 2022 cropping year could be 16 percent lower than in 2021 because of high fertilizer and fuel prices. Total 2022 cereal production will be about 37.8 million tonnes, down from 45.2 million in 2021. The most significant declines in cereal production will be in Ethiopia (21 percent), Kenya (12 percent), and Sudan (12 percent).

Compiled by Alain Agbor Ebot