Ajay Banga, the sole contender for the World Bank’s top job, says he has high ambitions for reform but the effort would take some time
WASHINGTON, USA – The US nominee to run the World Bank, Ajay Banga, said on Wednesday, April 5, that he supports his predecessor’s proposal to expand the bank’s annual lending capacity by about $5 billion to help tackle climate change and other global challenges, but added that this was only the start of reforms.
Banga, the former chief executive officer of Mastercard and sole contender for the bank’s top job, said in his first major address on his plans for the World Bank’s future that he has high ambitions for reforming the world’s largest development lender, but the effort would take some time.
“That’s good, we should do it,” Banga said of the $5-billion lending expansion plan proposed by departing World Bank President David Malpass.
“Maybe we can get a little more or even a lot more with the next set of steps. Whatever the amount may be, we have to put our balance sheet to work,” Banga said at the Center for Global Development.
But he said that to raise the trillions of dollars needed annually to reach 2030 and 2050 global emissions reduction goals, the World Bank needs to help catalyze private capital.
“For infrastructure, for climate, for inequality, the math is not on our side. The World Bank cannot do this alone,” he said. “Even with the generosity of governments, of philanthropies, the work of the other multilateral banks together, you’re going to fall short of those trillions.”
He said the World Bank’s major role in this area will be to reduce or remove risk from climate investments in developing countries so the private sector can invest in them “at scale.”
Among possible steps were the World Bank taking a first-loss positions in projects, de-risking projects by putting them on the International Finance Corporation’s balance sheet in the early stages and later transferring them to private sector investors, he said.
The World Bank needs to help create standardized pools of assets that long-duration investors such as pension funds can invest in at scale, while helping countries develop policies and climate plans that create stability for investors, Banga said.
AAA rating backed
A G20 report on climate finance suggested the World Bank could greatly expand lending if it were to accept a lower credit rating than the current, top-tier AAA rating, and some development groups have argued in favor of this approach.
But Banga, in response to a question, said losing the AAA rating was “a really poor idea.”
“If you were to lose the AAA rating, we are no longer doing what we need to do, which is to raise capital at a low enough cost that we can give it back or use it either in grants or concessional pricing for the countries that cannot afford to raise it for themselves,” he said.
Banga is now in the final stages of the World Bank executive board’s selection process after emerging from a March nomination period as the sole candidate. He is expected to be confirmed as World Bank president by early May. – Rappler.com
