Thu, May 11, 2023
by Emily Slater
Now that Biden-nominated World Bank presidential candidate Ajay Banga has been confirmed, the chatter around Washington (apart from the debt ceiling debacle and the King Charles coronation) is all about whether he will be able to navigate the enormous challenges facing the institution. Banga certainly has a herculean task ahead of him when he takes the reins on June 2. While most of the current conversation is focused on whether Banga’s resume and skill set can deliver on an ambitious World Bank reform agenda, it’s worth taking a moment to reflect on outgoing President Malpass’s tenure and the state of the institution he leaves to his successor.
When Malpass took office in April 2019, many wondered whether the Trump-appointed nominee would shed hawkish rhetoric on China and climate skepticism to be an effective leader of a global, multilateral institution. Plenty of detractors argue he did not. He certainly didn’t do himself any favors with his avoidance of pointed questions on whether he was a climate denier at last year’s Climate Week NYC which he later walked back. But on balance, Malpass leaves the World Bank in a stronger position than when he arrived and shepherded it through one of the toughest macro environments in its history.
Malpass took over a World Bank in the midst of an organizational culture crisis with a visibly and vocally disillusioned staff. His first order of business was to get the Bank back to basics by streamlining its operations and footprint and reinvigorating staff around its core mission of poverty alleviation. When the pandemic hit, the Bank moved with speed and scale to provide assistance to developing countries. It did the same in response to Russia’s invasion of Ukraine.
Throughout the economic fallout from these twin crises, Malpass tirelessly promoted debt transparency and sustainability initiatives to help developing countries break the cycle of unstainable debt. Under his leadership, the Bank Group more than doubled its climate finance to developing countries, reaching a record $32 billion last year. He also led successful and expedited IDA replenishments, re-upping the funding window for the world’s poorest countries.
Is it fair to say the Bank could have lent more under his leadership over the past few years to facilitate the net-zero transition or been more ambitious in its pandemic response? Sure, if you think the core mission of the World Bank is to address global challenges and you measure success by lending volume. But, if like Malpass, you believe in a World Bank whose core mission is economic growth and a country-driven approach to development, then it’s fair to say he effectively implemented that vision.
This poverty reduction vs. global public goods crossroads is exactly where his successor, Ajay Banga, inherits the Bank. As the largest shareholder of the World Bank, the United States has been pushing for a reform agenda that seeks to reorient the institution to better address global challenges such as pandemics, education, and climate change. But borrowing countries, particularly African countries, have been noisy about their interests in ensuring that poverty reduction remains a core priority for the World Bank, which is the largest provider of concessional finance for these countries. With donor countries so far unwilling to consider a capital increase for the Bank to lend more, their concerns over how the pie will be sliced are valid (especially with the IDA financing cliff they’re facing).
Banga will need to use every bit of his impressive resume to sow divisions among advanced economies, emerging markets, and low-income countries to build a shared agenda for all. And he will need to build on his extensive private sector experience to find ways to unlock the highly cited, and thus far unrealized, private finance. Expectations for him are sky- high. Based on what we’ve seen of him during his candidacy, he looks poised to be a transformational leader. He appears to possess the same charisma, ambition, and willingness to challenge orthodoxy, that the late Jim Wolfensohn brought to the job – arguably, the most revered World Bank President in its history.
Banga has an unenviable task ahead of him. No less is at stake than the existential relevance of the World Bank. While he looks like the man for the job, he deserves time (more than 100 days) and a fair shot at success before we start pulling out the scorecard.
Any leader’s job is to leave an institution in a better place than you found it. Wolfensohn did. Malpass did. Banga likely will too. But at the Bank’s current crossroads, leaving it a better place is a greater task than ever before. I’m certainly rooting for him.
Emily Slater is the Executive Director of the Bretton Woods Committee