WASHINGTON – As World Bank shareholders gather in Washington for their annual spring meeting on Monday, the global institution appears to be on the brink of significant change.
World leaders, led by Prime Ministers Emmanuel Macron of France and Ms Mia Mottley of Barbados, along with a constellation of academics and development experts want the bank to do more to help poor countries grappling with climate change.
The bank has set out its own vision for transformation, in response to calls for action from the United States and others. Major shareholders have approved some initial reforms, including agreements to let the bank lend more money and attract more private investment.
At the center of the discussions will be Mr Ajay Banga, who is widely expected to be confirmed as president of the bank in the coming weeks. When he takes over this summer, he will face high expectations and urgent questions about whether the bank will change its lending model, whether it will seek more money from shareholders and how he will direct the bank to address issues including poverty, global warming and the war in Ukraine.
“He’ll get a honeymoon, but he better use that honeymoon well,” said Mr Mark Malloch-Brown, the president of the Open Societies Foundation and a former vice president of the World Bank. “These institutions do not change quickly.”
A longtime finance executive, Mr Banga, 63, became chief executive at Mastercard in 2010, shortly after the company, which had been owned by a coalition of more than 25,000 financial institutions, went public. During 10 years as chief executive, he built Mastercard into a powerhouse now worth US$350 billion (S$466 billion).
“He fundamentally transformed what was a slow, bank-association culture into a high-performing, agile, innovative, proactive, now Fortune 20 company,” said Mr Mike Froman, a longtime Mastercard executive who is preparing to take over the Council on Foreign Relations. “That involved everything from leadership, motivation, vision, but also very importantly, changing culture.”
Critics of the bank complain that, in addition to being insufficiently focused on climate change, it is woefully slow to respond to major crises and lacks ambition and creativity.
Mr Banga said he intends to bring a new sense of urgency to the bank’s core mission of alleviating global poverty, while also taking on some of the biggest crises in the world today.
“Inequality is intertwined completely with challenges like climate change, challenges like fragility of the world with refugees and the like being caused by conflict, with challenges like the pandemic, with challenges like with Russia and Ukraine, with what that does to food and fertilizer,” he said in an interview. “I don’t think you can segregate these into buckets and hope that you can deal with one without dealing with the other.”
Mr Banga also will be faced with a delicate diplomatic task when he assumes the job. Although he has been nominated by the Biden administration, he will have to navigate the tension between the United States and China and he will need to press all of the major shareholders to make sure that their investments in the bank match their stated ambitions.
At a congressional hearing last month, Treasury Secretary Janet Yellen, whose portfolio includes overseeing the United States’ investment in the World Bank, made clear that she hopes the bank can help weaken China’s effort to exert influence in the developing world, which the United States views as predatory.
She wants the World Bank to provide an alternative lending option that provides “quality infrastructure investment” that is “responsible.”
“I’m very, very concerned about some of the activities that China engages in globally, investing in countries in ways that leave them trapped in debt and don’t promote economic development,” Ms Yellen said. “We are working very hard to counter that influence in all of the international institutions that we participate in.”
Securing more funding for the World Bank that would allow it to increase its lending capacity could also be difficult. Ms Yellen said that she thinks the World Bank can initially boost its capacity by stretching its existing resources and being more innovative.