Dear President Banga,
Congratulations on your appointment as the 14th President of the World Bank Group.
The Covid-19 pandemic, soaring inflation, geopolitical instability and the ever-looming spectre of climate emergency have all come to define this age of ‘poly-crisis’ in which we live. That these global challenges are both real and urgent is without question. But in the midst of such existential angst, there is still cause for optimism.
The World Bank Group – which you will shortly lead – possesses the global standing, not to mention the institutional and financial clout, to have a direct and lasting positive impact on the regions of the world most affected by these threats.
In order to live up to this promise, however, it has become increasingly clear that the Bank must modernise and reform. Though its recently published Evolution Roadmap represents a first step, we argue that the proposed reforms must go a lot further. What is more, we cannot assume that the practices of an institution created nearly 80 years ago in the aftermath of the Bretton Woods Conference are fit for the purpose of addressing the nature and scale of the challenges we face today. In short, 21st century problems call for 21st century solutions.
You will no doubt have your hands full as you navigate the early stages of your presidency. As soon as time permits, however, we urge you to consider the following five areas as a matter of priority. Doing so will underline that the World Bank is serious about enacting real change and bringing this age of ‘poly-crisis’ to an end.
1. Define a compelling vision for the World Bank’s mission
Expanding the World Bank’s mission to cover global challenges cannot simply be ‘additive’. It should also reflect the interdependence between development and climate goals and be integrated into the Bank’s operating model. The Country Climate and Development Reports provide the initial foundations for countries to understand how they can align their national development priorities with international climate goals. But reports can go only so far: the World Bank’s country offices must mobilise their considerable convening power and the Bank's financing capabilities to deliver on these ambitions.
2. Increase the efficiency of capital usage but also push for fresh capital and a boost to IDA
The World Bank should explore the full set of recommendations issued by the G20-commissioned external review of MDBs’ Capital Adequacy Frameworks (CAFs). While the World Bank’s Evolution Roadmap currently considers several potential capital innovations, it should systematically explore the other proposals too, particularly those concerning risk and governance. But CAF reforms alone will not be sufficient to give the World Bank the operational headroom to help countries deal with multiple crises while at the same time scaling up support for a broader mission. In tandem with an overhaul of the World Bank’s CAF, management and board should begin discussions on a substantial increase to the Bank’s capital base. But the overall volume of development finance must grow across all income groups, including stepped-up IDA replenishments for lower-income countries.
3. Streamline processes and agree on standards so that the World Bank can better respond to client countries
The World Bank must strike a better balance between maintaining high standards and reducing the processing times and transaction costs that result from onerous safeguards and bureaucratic requirements. If the Bank wants to incentivise greater borrowing, especially in middle-income countries, it cannot ignore these issues, which are of critical importance to client countries.
4. Take a World Bank Group approach, integrating the International Finance Corporation and the Multilateral Investment Guarantee Agency into the common strategies
The International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) should be central to mobilising the private sector for the climate and development agenda. But the joint impact can be far greater if the IFC and MIGA are deployed as part of an integrated World Bank Group offering that leverages the complementarity of instruments supporting the public and private sectors. Each part of the Group will need to examine how they interact in originating, delivering and structuring projects, the skillsets of staff, incentive systems and possible pricing approaches. Together, they should help set the right policy frameworks ‘upstream’ of private investment, work through public–private country platforms and move from transaction-by-transaction models to the provision of programmatic support (e.g. for public-private partnership programmes).
5. Take a much stronger leadership role in coordination with other MDBs
For coordination between MDBs to become more effective, the World Bank must take a much stronger leadership role. There is a need for collective action to fully harness capacities and complementarities across the system. This can be achieved in a number of ways: building on country platforms (primarily considered a strategy to catalyse finances for low-carbon transition), converging on standards, and creating asset classes for private mobilisation.
With your experience as a transformational leader, you have the ability not only to acknowledge the importance of these five priorities, but also to execute them effectively. Doing so would be a sure sign that when it comes to tackling the ‘poly-crisis’ head-on, the World Bank, and the MDB system in general, is up to the task.
- Sir Suma Chakrabarti, Chair, Board of Trustees, ODI
- Sarah Colenbrander, Director, Climate and Sustainability programme, ODI
- Chris Humphrey, Senior Research Associate, Development and Public Finance programme, ODI
- Hans Peter Lankes, Visiting Senior Fellow, ODI & Visiting Professor in Practice, Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science
- Sara Pantuliano, Chief Executive, ODI
- Annalisa Prizzon, Principal Research Fellow, Development and Public Finance programme, ODI