Ajay Banga: World Bank can be a change 'catalyst,' more reforms likely

The World Bank can be a “catalyst for change” across global institutions, drive innovation on climate and digitalization, and bring in private sector investors for development, according to Ajay Banga, the sole nominee to take over as president of the anti-poverty lender. Banga, the former CEO of Mastercard, spoke Wednesday in Washington, D.C., in his first major public address since U.S. President Joe Biden tapped him for the job in February. Banga is likely to be confirmed by the board in the coming weeks and would start his five-year term in July. Banga welcomed the $50 billion in additional lending over the next 10 years that outgoing chief David Malpass and the board have agreed on as part of major capital adequacy reforms, but said these moves may be just the “first steps.” But as much as the bank might be able to “squeeze” out of its existing resources, Banga added, it’s not enough to meet the multitude of global challenges, including poverty and climate change. He emphasized the urgency of getting the private sector more involved. Banga will be taking over a complex organization with several wings and more than 17,000 staff around the world. The two main wings of the bank, the International Bank for Reconstruction and Development and the International Development Association, issued $70.8 billion of financing in 2022 alone. Perhaps sensing the huge task of reforming the 78-year-old lender that will soon be on his shoulders, Banga asked for the public to “manage expectations” and not to think of him as a “white knight” or someone with a “magic wand.” But he added: “I am ambitious.” On his watch, the bank would be less cautious without ditching accountability, he said. “We won’t win the fight ahead of us without some risks,” he said, quickly adding: “The trick is to not make the same mistake twice.” His remark came across as a subtle dig at an institution that has often been seen as very conservative and risk-averse. Changing that culture will be a major part of his job. Banga balanced his comment by arguing the bank has gotten undeserved bad press despite often quietly leading the way. He rattled off innovations the bank launched, including solar energy initiatives in India’s transportation sector and Brazilian projects to tackle pollution. To bring in the private sector, Banga said he would try to position the bank to help “de-risk” investments and make investors feel safer in areas outside their comfort zones. “The private sector won't come in when there are risks they don't understand or a landscape they don't get,” he said. The incoming president will not be the first to try to invigorate private sector involvement in development, though it has always proved a significant challenge in the past. It remains to be seen if the former finance executive has a trick up his sleeve. Banga has been traveling the globe in recent weeks, visiting 40 countries as part of a campaign to shore up support among shareholders. “I am deeply concerned about what I am seeing,” he said. “We’re seeing decades worth of hard-won progress erode in a matter of months — and short years.” For more than a year, the World Bank itself has warned about a “reversal in development,” in part brought on by COVID-19 and made worse by the war in Ukraine, inflation, and debt. Banga also highlighted the difference between the conversations in the advanced economies and concerns in low-income countries. For example, in the global north, he said, the focus of climate is on carbon emissions. However, for their poorer counterparts, it’s about soil degradation and their livelihoods. “Too many buzzwords going around and too little common sense,” he said in summarizing his findings and arguing for more practical solutions to problems. He said job creation had to be a priority, as a key step to having a good quality of life. But he tied this idea of a good life to a more holistic approach that includes good health and a better environment. He said the changing climate is “scary.” Chunks of his speech to the Center for Global Development spoke to the need to digitalize economies so that people everywhere can take advantage of new tools. But he acknowledged that different countries face different challenges and the bank will have to deliver for them all. “It must pursue both climate adaptation and mitigation, it must reach out to lower-income countries without turning its back on middle-income countries, it must think globally but recognize national and regional needs,” he said. Banga, who is still effectively in the phase of being interviewed for the job, insisted that at Mastercard, he was able to balance competing interests and “find ways to work with everyone.” He argued this experience at a global company makes him well-placed to take over the bank — not only because of his work on financial inclusion, but because he has experience managing a multilateral organization and has had to overcome suspicion and nationalism. However, when it came to the urgency he felt around development, he was less corporate and more personal, citing his own family as driving his passion around climate change. “I’m in this game to make my grandchild’s life better,” he said.