Stanley Fischer Memorial Lecture: Public Debt and Central Banks — The World Bank Group ABCDE Conference

David R. Malpass

No 11428, Policy Research Working Paper Series from The World Bank

Abstract: This paper, based on the Stanley Fischer Memorial Lecture that the author delivered at the Annual Bank Conference on Development Economics (ABCDE) 2026, examines two structural impediments to broad-based economic development: dysfunctional central bank currency systems and inadequately resolved sovereign debt burdens. On currency, the paper argues that floating exchange rate regimes and multiple exchange rate systems—as practiced in countries such as Ethiopia, Nigeria, and Egypt—systematically transfer wealth from low-income wage earners to a narrow-privileged class, deepening poverty rather than alleviating it. Using Ethiopia as a central case study, the paper documents how successive devaluations have raised the national poverty rate from 33 percent in 2016 to a projected 43 percent by 2025, while eroding the real value of development assistance disbursed in local currency. The paper proposes that currency stabilization, low-cost digital payment infrastructure, and unsterilized central bank intervention offer a more direct path to rising median incomes than current IMF-endorsed exchange rate flexibility. On sovereign debt, the paper evaluates the performance of the G20 Common Framework and the Global Sovereign Debt Roundtable against the benchmark of the 1989 Brady Plan, finding that contemporary frameworks have generated intensive creditor engagement but minimal net present value reduction for debtor countrie s. Key failures identified include the absence of a single comparable discount rate for measuring debt relief, incomplete participation by China and commercial creditors, growing opacity in collateralized sovereign transactions, and the risks posed by value recovery instruments to the durability of restructuring agreements. The paper concludes that neither the Common Framework nor the Global Sovereign Debt Roundtable, in their current forms, are fit for purpose, and calls for replacement frameworks that prioritize measurable median income gains over creditor accommodation. Absent reforms on both fronts, per capita income growth in low-income developing economies is projected to remain at approximately 2 percent annually, leaving 5.6 billion people with incomes less than one-tenth of those in advanced economies and widening the global development gap.

Date: 2026-07-20
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