Analysis-Incoming World Bank chief faces tests before he gets to climate
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[February 25, 2023]
By Valerie Volcovici and Andrea Shalal
WASHINGTON (Reuters) - Ajay Banga, U.S. President Joe Biden's pick to
run the World Bank, will face a tough slate of issues around the
institution's finances and capital structure from the get-go, thorny
problems he must address as he reshapes the bank into a force for
combating climate change on top of its traditional role as a poverty
fighter.
Biden and his team have ambitious plans for overhauling the 77-year-old
World Bank, which critics have said under its outgoing chief David
Malpass was too timid in financing climate initiatives and still funds
substantial fossil fuel projects across the developing world.
The key to it all, of course, is money, and as organized and funded now,
the World Bank would be stretched to meet those goals.
Banga's nomination, announced on Thursday, won a round of rapid
endorsements as top finance leaders met on Friday in India, a sign his
ascendance by early May - or possibly sooner - is all but assured,
though other member countries can also submit nominations through March
29 before the World Bank's governors choose the president.
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Even before he takes office, the former Mastercard Inc chief is expected
to start working his numerous constituencies as early as April when top
officials meet in Washington at the World Bank and International
Monetary Fund's spring meetings. Member countries are expected to
approve initial moves to stretch the bank's balance sheet to free up
more funds for climate projects, pandemic preparedness and other
priorities.
If confirmed, he will jump into high-profile talks in June hosted by
French President Emmanuel Macron and Barbados Prime Minister Mia Mottley
focused on developing a new global financial pact to reform how rich
countries finance poor countries grappling with climate-driven damages.
Under Banga's leadership, Mastercard became among the first companies to
set net-zero emission targets under the Science Based Targets
initiative. He also serves on the advisory board of Beyond Net Zero, a
climate finance fund.
Biden administration officials touted Banga's decades of experience
building global companies and public-private partnerships to fund
responses to climate change and migration.
"Ajay has proven his ability as a manager of large institutions and
understands investment and the mobilization of capital to power the
green transition," said John Kerry, the U.S. special envoy on climate
change.
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![](../images/022523PIX/news_f63.jpg)
President and CEO of Mastercard Ajay
Banga leaves after meeting India's Prime Minister Narendra Modi at a
breakfast in the Manhattan borough of New York September 29, 2014.
REUTERS/Carlo Allegri
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SEEKING RESOURCES
An even tougher challenge then awaits Banga in winning a capital
increase from member countries. This will be especially difficult
for the World Bank's top shareholder, the United States, due to
political brawling between the Biden administration and the
Republican-majority House of Representatives. The House has major
sway over the country's purse strings and its leaders are not
disposed to widen the World Bank's role in fighting climate change.
In fiscal 2022, the World Bank committed more than $104 billion to
projects around the globe, according to the bank's annual report.
Experts say countries will need trillions of dollars to fight and
adapt to climate change.
Before an increase can even be considered, U.S. officials say
changes in World Bank debt-to-equity ratios and other rules could
free up more funds for the climate fight, given the reluctance of a
politically divided U.S. Congress to appropriate more funds in a
direct capital increase.
An independent report prepared for the Group of 20 major economies
said changing the way the bank and other multilateral development
banks (MDBs) operate could unlock hundreds of billions of dollars in
additional funds.
But some middle-income countries worry that could weaken the bank's
AAA credit rating and raise borrowing costs, Mark Malloch Brown,
president of the Open Society Foundations told Reuters.
"The middle-income countries worry ... that the cost of borrowing
will increase because of the refusal of the West to put up more
cash."
Iskander Erzini Vernoit, director of the Morocco-based climate think
tank Imal Initiative for Climate and Development, said the U.S. -
which has only contributed $2 billion of the $100 billion in climate
finance rich countries have pledged - needed to invest more.
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"Playing the blame game with management of the MDBs will only get
you so far, and not far enough to finance tackling the polycrisis at
scale," he said.
(Reporting by Valerie Volcovici and Andrea Shalal; Editing by Dan
Burns and Josie Kao)
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