MARRAKESH, Morocco, March 9 (Reuters) – World Bank President Ajay Banga will face pressure this week to focus on climate change, but the former Mastercard CEO will first We need to get shareholders on the same page about how to grow.
Just 130 days into his role, Mr. Banga is tasked with expanding the multilateral development finance institution’s mission to address global crises such as climate change, pandemics and fragile states.
But with climate financing needs estimated to reach up to $3 trillion a year in emerging market and low-income economies by 2030, development advocates have warned him that the World Bank and International Monetary Fund ( The International Monetary Fund (IMF) is calling for its first annual meeting to make tackling global warming a priority. meeting.
A G20-commissioned panel of experts in July recommended that the World Bank and other multilateral development banks (MDBs) increase annual lending by $260 billion, more than triple the current pace, to address climate change needs. did.
“We want our shareholders to strongly support that goal and demonstrate their plans to advance it,” said Amy Dodd, director of development policy at ONE Campaign.
But Banga said a big step at the meeting in Morocco would be shareholders’ long-awaited approval of amendments to the bank’s anti-poverty mission statement.
The move to add “A Better Planet to Live in” has been in the works for a year, and the development community is eager for next steps to maintain momentum and quickly scale up funding.
In April, the World Bank lowered its capital-to-loan ratio to increase lending by $50 billion over 10 years. But many subsequent measures are more complex, requiring countries to decide how much tax money they are willing to contribute or risk.
“I’m very skeptical that the scale of the Marrakech institution will move forward significantly,” said Clemens Landers, a former U.S. Treasury official who now works at the Center for World Development in Washington.
The group released a new scorecard on MDB reform on Monday, saying broad changes are “well underway” but progress in implementing them has been limited.
complex movements
For now, the U.S. wants countries to uphold loan guarantees from the World Bank, and President Joe Biden has asked Congress to issue a $2.1 billion package that would allow for $25 billion in new concessional loans over 10 years. It is pushing ahead with requests to approve new funding.
A World Bank report to be reviewed in Marrakech estimates that the $10 billion in guarantee commitments could increase lending by $60 billion over that period.
However, other major shareholders are not participating in the US move, which is seen by US lawmakers as a more preferable alternative to a general capital increase, as it would likely lead to China increasing its stake in the bank. ing.
British officials have voiced support for the capital increase, while Germany supports issuing more hybrid capital, a debt-like instrument, which the World Bank says would generate an additional $40 billion in new funds over 10 years. We estimate that there is a possibility that financing will increase.
Greater action would mean more lending for the World Bank’s “callable capital” (a cushion of emergency funds pledged by shareholders but not paid in), which would require legal restrictions in some countries. Revision is required.
Banga said the move would be complex and negotiations would take time. But the payoff could be huge, with the Rockefeller Foundation estimating that if rating agencies changed their ratings, lending would increase by about $900 billion over 10 years.
A U.S. Treasury official told Reuters the department is working on the callable capital rules with a view to making a decision by April 2024.
plumbing work
Mr Banga downplayed the increase in lending, emphasizing efforts to make the 16,000-person organization more agile and focus on projects with tangible impact, saying he wanted to “fix the plumbing”.
Other World Bank presidents, including Jim Yong Kim, have been unable to meaningfully reform the Bank, which Banga called “dysfunctional,” despite talented and dedicated staff.
“He’s a game-changer,” said a senior U.S. Treasury official who nominated him for the job.
Bankers say the Indian-born American’s approach has caused internal friction, but Mr. Banga, 63, has been praised for pushing the envelope.
“Banga is off to a good start,” said Michael Clark, Germany’s representative on the World Bank’s board of directors.
“Let Banga be Banga. Good leaders take thoughtful risks and sometimes make mistakes,” Craik added.
Report by David Lawder.Editing: Alexander Smith
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