The World Bank’s Development Committee failed to agree a communiqué following its meeting at the World Bank and IMF Spring Meetings on 12 April – as Russia’s invasion of Ukraine once again prevented members from agreeing common language, as was the case at the 2022 Spring and Annual Meetings (see Dispatch Annuals 2022. Springs 2022).
The chair’s statement from Mohamed bin Hadi Al Hussaini, finance minister of the United Arab Emirates, contained little in the way of multilateral consensus – showing that despite the growing cries for reform of the Bank, geopolitical fragmentation remains an enormous hurdle to the transformative institutional changes needed to modernise it for the 21st century. The statement noted, “Most Development Committee members recognized that Russia’s invasion of Ukraine has continued to have massive humanitarian consequences and a detrimental impact on the global economy….There were [also] other views and different assessments of the situation.”
Reflecting on continued discussions between World Bank senior management and executive directors on the World Bank’s ‘evolution roadmap’ – which was initiated at the request of the G7 at the 2022 Annual Meetings – the chair’s statement noted, “Development Committee members took stock of this work. Governors welcomed the ambition and progress to date and look forward to additional constructive work to achieve major milestones by…[the World Bank Annual Meetings] in October in Marrakech. They expect the Board of Executive Directors and WBG management to finalize a work plan with detailed actions to be taken.”
The statement noted, “Members are committed to ensuring that the WBG has adequate financial capacity to respond to development challenges and support its expanded mission. They strongly reaffirmed their commitment to boosting the WBG’s financial capacity, including through a revision of IBRD’s [the Bank’s middle-income lending arm] minimum Equity-to-Loan Ratio to 19 percent, a Hybrid Capital pilot for capital-market investors, and a scaled-up bilateral guarantee program. Development Committee members expect further updates to the Executive Directors on the implementation of these initiatives, which have the potential to add up to $50 billion of financing capacity over the next ten years.”
However, in their individual statements to the Development Committee, many middle- and low-income countries noted the limitations of these ‘balance sheet optimisation’ measures, which will not increase the size of the Bank’s concessional financing, according to a paper on the evolution roadmap prepared by Bank management for the Development Committee.
According to reporting by online media outlet Climate Home, Brazil’s finance minister Fernando Haddad said in his statement to the Development Committee that “balance sheet optimisation has limited capacity, and other options, including new contributions from donors and a capital increase [for the International Bank for Reconstruction and Development (IBRD), the Bank’s middle-income country lending arm], should be considered later on [in] this process”, with statements from China, India, Thailand, South Sudan and DR Congo making similar calls.
Dysfunctional and outdated World Bank governance limits scope for genuine reform
The US and other G7 allies, by contrast, were clear that no discussions on an IBRD capital increase are on the horizon, with US finance minister Janet Yellen noting in a recent appearance at US Congress, “we’re not requesting a capital increase at this time”, per Climate Home. The G7’s failure to commit to providing the Bank with further resources in order to finance an expanded mission was especially ironic, given that the group had spawned the evolution roadmap discussions in the autumn.
The US’s out-sized role in World Bank governance was again on display at the Spring Meetings, and is a part of the institution’s growing credibility gap – with the US’s unopposed nomination of former Mastercard CEO Ajay Banga as the next World Bank President looking set to signal the continuation of the Gentleman’s Agreement, which was forged at the Bank’s founding, before many of its current borrower countries had gained independence (see Observer Spring 2023).
Most worryingly from civil society’s point of view was the Development Committee’s unwillingness to reconsider the Bank’s Billions to Trillions approach, which a growing number of researchers and analysts – and indeed many of the institution’s own staff and senior officials (albeit in off-the-record conversations) acknowledged has failed to deliver, on its own terms. Instead, according to the chair’s statement, Development Committee members “called for WBG-wide ambitious and integrated approaches to increasing private capital, facilitating investment, and leveraging the role of the public sector—while improving the business environment.”
As the roadmap continues on its march to Marrakech, and the world celebrates the 75th anniversary of the Universal Declaration of Human Rights, civil society will be vocally calling for the Bank to rethink core elements of its development paradigm, with academics Juan Pablo Bohoslavsky and C.P. Chandrasekhar proposing the Bank adopt new hybrid development indicators that link countries’ fiscal space to their ability to fulfil basic human rights during the Spring Meetings.