MARRAKECH (Reuters) – The President of the World Bank, Ajay Banga, is expected this week on his plans for the institution in terms of climate change and loans to emerging countries, while a series of meetings with the International Monetary Fund (IMF).
Ajay Banga, who took office just 130 days ago, has a mandate to expand the multilateral development lender’s mission to tackle global crises that include climate change, pandemics and emerging economies.
But the very significant financing needs for the climate transition, estimated at $3,000 billion for emerging markets and low-income economies by 2030, are pushing development advocates to call for action to combat global warming. a priority during its annual meeting.
In July, a G20-mandated panel recommended that the World Bank and other multilateral development banks (MDBs) increase their annual lending by $260 billion, more than three times their current pace, to meet climate-related needs.
“We would like shareholders to endorse this goal and come up with a plan to move it forward,” said Amy Dodd, director of development policy at ONE Campaign.
Ajay Banga, however, said the meeting in Morocco would first focus on amending the bank’s long-awaited anti-poverty mission statement.
Adding the phrase “on a livable planet” to the mission statement has been in the works for a year, and the development community is eagerly awaiting the next steps to rapidly increase funding.
In April, the World Bank lowered its equity ratio to increase lending by $50 billion over 10 years. But many other measures are more complicated to put in place and require shareholder countries to decide how much public funds they are willing to provide.
“I’m very skeptical that there will be any big moves on the size of the institution in Marrakech,” said Clémence Landers, a former U.S. Treasury official who now works at the Center for Global Development in Washington.
The group released a new map for MDB reforms on Monday, saying broad changes are “underway” but progress in implementing them has been limited.
COMPLEX MOVEMENTS
For now, the United States wants countries to support World Bank loan guarantees, with President Joe Biden asking Congress to approve $2.1 billion in new funding that could unlock $25 billion new concessional loans over a decade.
A World Bank report to be examined in Marrakech estimates that $10 billion in commitments could increase lending by $60 billion over this period.
However, no other major shareholders have joined the American approach, which is seen as a more acceptable alternative to American elected officials than a capital increase that would likely lead to greater Chinese participation in the bank.
British officials have expressed support for a capital increase, but Germany has come out in favor of a larger issue of hybrid capital, a debt-like instrument, which the World Bank estimates could add 40 billion dollars in new loans over a decade.
Another measure would increase lending against the World Bank’s “callable capital,” a cushion of emergency funds promised by shareholders but not paid, but that would require some countries to change their laws.
Ajay Banga said the measure was complex and would take time to negotiate. The Rockefeller Foundation estimates that if rating agencies changed their assessments, lending would increase by some $900 billion over a decade.
A U.S. Treasury official told Reuters the department was working to develop rules for mobilizable capital so decisions could be made by April 2024.
“REPAIR THE PIPING”
Ajay Banga downplayed the increase in lending and focused on his efforts to make the 16,000-strong organization more agile and more focused on projects with measurable impact, saying: he wanted to “fix the pipes.”
Other World Bank presidents, including Jim Yong Kim, have been unable to meaningfully reform the bank, which Ajay Banga has called “dysfunctional”, despite having a talented and dedicated staff.
“He shakes things up,” said a senior official at the US Treasury, which appointed him to the post.
Although the Indian-born American citizen’s approach has caused some internal friction, according to bank staff, Ajay Banga, 63, is appreciated for pushing the boundaries.
“Banga is off to a good start,” said Michael Krake, who represents Germany on the World Bank board.
“Let Banga be Banga. Good leaders take calculated risks and also make some mistakes,” added Michael Krake.
(Reporting David Lawder, French version Corentin Chappron, editing by Kate Entringer)
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