Following the early resignation of current World Bank President, David Malpass, the United States (US) has nominated Ajay Banga as his replacement. This comes after a chorus of calls from around the world for the Bank to break with tradition and have a leader from the developing world.
Perhaps sensitive to those calls, the US has named Banga as its choice to replace Malpass. Banga is an Indian-born American businessman, who spent a decade as the Chief Executive Officer (CEO) of MasterCard.
By choosing Banga as its nominee for World Bank President, a number of boxes have been ticked. His origin is both a nod to the developing world, as well as a nod to diversity in the leadership of some of the main global institutions. Banga will also join the company of Tedros Adhanom Ghebreyesus, an Ethiopian who heads the World Health Organization (WHO) and Ngozi Okonjo-Iweala, a Nigerian heading the World Trade Organization (WTO).
In formal terms, the Board of the World Bank considers nominees put forward by all of its constituents for president. Therefore, in theory, it is not a foregone conclusion that Banga will be an automatic pick. However, tradition suggests that the World Bank President is always the candidate nominated by the US.
Some argue that since the US is the largest shareholder and the largest donor to the concessional arm of the Bank, that it is important for the nominee to have the full support of its largest shareholder. However, this is tantamount to suggesting that those who pay the most taxes should somehow have a controlling interest in the affairs of a state.
Banga, as the presumptive president of the World Bank, has a huge job ahead of him.
There are several low and middle-income countries that have de-prioritised the Bank, and instead hedge their bets elsewhere to meet their development financing needs.
Banga will have a job on his hand to make the World Bank relevant to these constituents, thereby making it the development partner of choice for the vast majority of the developing world.
There are also calls in some quarters for a larger World Bank. According to Homi Kharas, a Senior Fellow and Deputy Director for the Global Economy and Development
Program at the Brookings Institution, a larger Bank would allow it to undertake very large investments. For Kharas, this can be done by having the Bank marry its own financial and analytical powers with those of private financiers and other partners.
Having the Bank scale-up its operations is seen as key to generating decisive transformations in developing countries. This is particularly relevant in the context of the climate crisis, the COVID-19 induced economic challenges and the geopolitical dynamics which are placing a squeeze on many in the developing world.
Particularly on climate issues, Banga will need to find a way to guide the Bank to further integrate climate and development. Indeed, the climate crisis is probably the single largest development challenge facing many parts of the world. Therefore, scaling up action to counter this crisis would be critical for the Bank and Banga’s own legacy.
Perhaps this is one way to win the confidence of those countries on the frontline of the climate crisis.
According to the Bretton Woods Project, the World Bank and its peer organisation, the International Monetary Fund (IMF), “continue to be amongst the most relevant and significant powerful norm-setters, convenors, knowledge-holders and influencers of the international development and financial landscape.” Of course, this is not to downplay the many legitimate concerns normally levelled at both institutions.
Nonetheless, the onus is also on the Bank’s constituents, including developing Members, to hold its leadership accountable and demand a way of operating which is friendly to their development interests. The US may exercise the greatest influence in the Bank, but it is also nothing without its core constituents.
Joel K Richards is a Vincentian national living and working in Europe in the field of international trade and development.