Over the past two years, a drumbeat of calls for World Bank reform has made its way onto the front pages of major newspapers and the agendas of heads of state.
Many low- and middle-income countries – the populations the World Bank is supposed to help – are falling deeper into debt and facing rising costs as the impacts of climate change become more severe. A chorus of critics accuses the World Bank of doing so not evolve Unpleasant cope with the crises.
The task of leading that reform will almost certainly fall now Ajay Bangaan Indian-American businessman and former CEO of Mastercard who was nominated by President Joe Biden to replace the outgoing World Bank president David Malpas. The nominations closed on March 29, 2023 with Banga the only candidate.
There is no shortage of advice for what Banga and the World Bank should do.
The G-20 recently released a report urging the World Bank and the other multilateral development banks to ease their credit restrictions to allow more money to flow to countries in need. A committee led by economists Nicholas Stern and Vera Songwe called for rapid, sustained investment pressure that prioritizes the transition to cleaner energy, with the UN Sustainable Development Goals and meet the needs of increasingly vulnerable countries.
African finance ministers are coming soon with their own “to do” list for the World Bank, and India’s finance minister has just joined forces an expert group to consider reforming the World Bank.
Banga gets the job done with this and many other to-do lists. Still, he will inherit a corporate culture that makes the World Bank Group too inward looking And too slow to respond.
I have worked for the World Bank Group and thus from the outside. I see four key roles – four “Cs” – that Banga will have to master from the start. His State of service and his reputation for deep thoughtfulness, I am confident he can.
1) Act as CEO and put the whole house of the World Bank Group in order.
The World Bank Group is a conglomerate with four balance sheets, three cultures and four directorates, plus a dispute resolution department.
Lending to low- and middle-income countries is only part of its role. Also the World Bank Group provides technical assistance in all areas of economic development and invests in and delivers risk insurance Unpleasant encourage companies to invest in projects and places they would otherwise find too risky. The ability to mobilize private sector finance and stretch every dollar is critical to meeting the world’s development and climate adaptation and mitigation needs.
Banga will have to set clear goals for each part of the World Bank Group and make them work more effectively to help the world achieve its goals.
2) Take on the role of commander-in-chief to tackle the debt and climate crisis.
Many of the World Bank Group customer countries are faced with both increasing debt and rising costs due to climate change.
The high borrow costs could hamper developing countries’ ability to invest in the necessary infrastructure to grow and protect their economies, and they fear being excluded from global trade as the United States’ green subsidies in the Inflation Reduction Act and the European border carbon tax make it more difficult for them to compete.
The solutions to solve such problems cannot be managed by one institution. The current multilateral development banking system – the World Bank Group and the regional development banks – is incoherent at best and competitive in the worst case.
In the past, the leaders of the development banks, the International Monetary Fund and the World Trade Organization have more or less worked together, depending on crises and personalities, and can act quickly when needed.
For example, during the global financial crisis of 2008 and 2009, the then leaders of the World Bank and WTO rushed to develop trade finance facilities to support banks in developing countries as capital fled to the US and Europe. It took intense diplomacy to get rich countries and institutions to get money out the door support businesses and trade. Success was not measured in months, but in days.
The new World Bank president will need to support more radical cooperation among development financial institutions, including the pooling of capital and talent, to respond quickly to countries’ needs.
It won’t be easy. The institutional rivalry runs deep. But with tight budgetsit is becoming increasingly clear that there is no choice – the capital already in the system is closest at hand and can be better deployed if institutions are willing to adapt.
3) Be a conversation partner.
Rethinking the way international finance works needs everyone on board: development banks, central banks, regulators, investment banks, pension funds, insurance companies and private equity.
Banga and International Monetary Fund Director Kristina Georgieva can resolve institutional differences and present a coordinated face to private investors and the major lending countriesincluding China – which originated as the largest container of developing countries’ debts – to accelerate aid to countries in difficulty.
On other topics, such as nature-based solutions to climate changeby building resilience and economic inclusion, the World Bank Group can bring its considerable resources and skills, including data analytics, into global conversations where it has been painfully absent for the past four years.
4) Be a champion for the most vulnerable.
The most vulnerable people in the world are the ultimate beneficiaries of the World Bank Group. For those living on the front lines of biodiversity loss and climate impacts such as extreme heat, drought and flooding, the current international financial system is proving inadequate.
The World Bank Group’s management incentives are still too focused on board-approved loans, not on the results of those loans, advice and aid.
Throughout history, the leaders of the World Bank have been able to make money rapid changes to better help vulnerable countries when they stay close to the needs of their final beneficiaries and the goals the world has set.
The next president faces turbulent times. Banga’s attentive listening during his campaign tour indicates that he understands the complexity. It’s an extraordinary moment in the history of the institutionwith towering expectations of what a leader should do.
This article was updated on March 30, 2023 with the announcement that Banga is the sole candidate for the presidency of the World Bank.