By Andrea Shalal

WASHINGTON, (Reuters) – Monday’s statement by David Malpass, President of World Bank, said that fiscal and monetary policy were in an “uncharted territory” since the COVID-19 pandemic. This could be contributing to a rise in inequality and poverty worldwide.

Malpass stated that the total number of those living in poverty has increased by more than 100 million since the start of the pandemic, even though global spending is at an all time high.

The advanced economies have experienced a recovery, while those in the least developed countries saw a slight rebound or even no improvement. These were causing “tragic changes” in median incomes, women empowerment, and nutrition. Inflation, supply chain bottlenecks as well as high energy costs, are also aggravating the trends.

Malpass stated that global finance is a major problem and pointed out the inequality of the stimulus structure. He also noted the fact that the prevailing sovereign debt and fiscal policies are contributing to the increase of inequality.

Malpass claimed that the monetary policies of advanced economies have long been focused on reducing reserve requirements ratios and limiting growth in bank deposits to attain stability in prices and currencies. China is using this approach.

Others had also switched to “post monetarism,” which saw large sums of surplus bank reserves used to purchase long-duration bonds, and other assets. This provided price support only for certain assets.

This approach did not work for small companies or developing nations, but it did restrict policy via regulation of liquidity ratios and bank capitalization.

The fiscal policy channeled resources only to a small group of major borrowers while leaving the rest behind. Sovereign debt policies contributed to inequality.

Malpass reiterated the call for transparency in debt agreements and for a freeze on debt payments to countries with high levels of unsustainable debt. His words were clear: creditors must move beyond collateral and escrow arrangement.

“As one of the largest creditors of developing countries, China’s active participation and strong voice in debt reduction efforts are very much needed and would benefit all participants by encouraging sustainable investment and debt,” he said.