As he fights to raise $100 billion for fighting poverty and spearheads a multilateral evolution, Axel van Trotsenburg — the World Bank’s second-in-command — has one big request for the world’s aid donors: Just be honest.
Also in today’s edition: An exclusive on EU budget cut plans and a new road map for multilateral development bank reform.
Axel to grind
In a wide-ranging interview with Devex President and Editor-in-Chief Raj Kumar, Axel van Trotsenburg — the World Bank’s senior managing director — said that governments are putting the fight against poverty at risk when they spend money on other priorities and call it development assistance.
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“People think this is development support for developing countries. These days, a large chunk is actually staying in the countries themselves, the donors themselves,” he said at Devex World yesterday.
“I'm pleading for a kind of new honesty,” he said. “Just say what you're doing. Just say where it's going … We are hopelessly off track of the SDGs, so the more we hide this, the more we fail these countries.”
While van Trotsenburg did not single out the United Kingdom, its government has come under fire for funneling about $4 billion from its aid budget into covering the costs of hosting refugees at home.
“I support that these expenses are taking place. But for the public perception that this is actually development assistance, there is a problem,” van Trotsenburg said.
It’s not just a matter of principle for the 36-year World Bank veteran. As co-chair of the 21st replenishment of the International Development Association — the bank’s highly lauded fund for the lowest-income countries — van Trotsenburg has just over a month to lock in upward of $25 billion in donor contributions, which the bank could leverage to reach its $100 billion target.
That’s a tougher-than-usual task when some formerly reliable donors are cutting — or diverting — their aid budgets and multiple funds are competing for cash at the same time.
“If you think that the money will come automatically, it’s a mistake,” van Trotsenburg said.
A few other highlights from the interview with van Trotsenburg:
• On whether the World Bank’s ambitious “evolution” reforms are moving quickly enough: “Personally, I don't see the evolution agenda for efficiency and effectiveness of the World Bank as a finite period. I think if you have a large organization with 17,140 officers in the world, that's a permanent one, because you can always improve.”
• On his boss, World Bank President Ajay Banga: He “brings a different, healthy impatience to actually push this agenda” and has “taken advantage of his network of contacts with the private sector.”
• On shareholder power at the World Bank: “The African population will be basically almost a quarter of the [global] population [by 2050]. Should they have 3% or 4% in [the International Bank for Reconstruction and Development]? I think that's untenable.”
Read: Top World Bank official vows to fight for every development dollar (Pro)
Viva! Spain gave the IDA fight a boost yesterday with a €400 million ($432.9 million) pledge — an increase of nearly 40% over its last contribution.
ICYMI: Spain bucks Europe's aid trend, but journey is just beginning
+ In a live episode from Devex World for our weekly podcast, Raj sits down with Tariye Gbadegesin, CEO of Climate Investment Funds, to discuss scaling up climate finance ahead of next month’s COP29.
Cutting to the point
The European Commission always said the midterm review of its 2021-2027 development budget would be bold. Then in February, the European Union’s 27 national leaders told Brussels to find €2 billion in cuts to foreign aid in order to prioritize other issues like fighting irregular migration and supporting Ukraine in its war against Russia.
The problem was, in the meantime, the commission had launched the Global Gateway — an attempt to combat China’s Belt and Road initiative by investing in green and digital infrastructure.
Something had to give. And this month my colleague Vince Chadwick found out what:
In order to maintain blending, guarantees, and technical assistance for private sector investments under the Gateway, the commission is planning to drastically reduce the amounts allocated to individual countries.
The cuts will fall hardest on countries “with a less performant partnership” the commission told EU states in documents Vince obtained.
Losers include many least developed countries, like the Central African Republic (down 73% for the 2025-2027 period compared to 2021-2024), Togo and Guinea-Bissau (both down 48%), and Madagascar, Malawi, and Mozambique (all down 45%).
They will still be able to vie for access to regional investment envelopes. But experience tells us that the Malawis and Togos of the world are not where the European private sector sees the most obvious investment case — no matter how much de-risking the European Commission offers.
Tellingly, the one budget line that appears to have best weathered the cuts was communication. As the commission acknowledged to EU states, the cuts will require “careful communication towards partner countries” around the world.
Exclusive: EU to shun ‘less performant’ countries under new strategy (Pro)
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On the road again
The next phase of multilateral development bank reform got some driving directions yesterday when finance ministers and central bank governors of the Group of 20 largest and emerging economies endorsed the “G20 Roadmap toward Better, Bigger, and More Effective MDBs.”
My colleague Adva Saldinger has the readout from a G20 communiqué that offers some clues about the road map — the full document is not public (anyone have a copy?) — and we wrote about a draft earlier this year.
The road map is a set of recommendations and actions for MDBs to “evolve their incentive structures, operational approaches, and financial capacities, so that they are better equipped to maximize their impact in addressing a wide range of global and regional challenges, while accelerating progress towards the SDGs.”
It wants banks to continue increasing their financial capacity and meet the recommendations made in the previously approved Capital Adequacy Framework. It also suggests a new system for determining whether MDBs should get a capital increase.
What the communiqué doesn’t offer are any new solutions to the global debt crisis or any fixes for its Common Framework for debt treatments. Civil society organizations did not hide their disappointment.
ICYMI: Inside Brazil’s G20 vision for multilateral development banks
+ For more content like this, sign up to Devex Invested, a free, weekly newsletter bringing you the insider brief on business, finance, and the SDGs.
Numbers game
Earlier this week we gave you a heads-up that Thursday was gender day at the World Bank and International Monetary Fund annual meetings. That came with some new commitments and targets from the World Bank. They are:
• Digital connectivity — Enable 300 million more women to use broadband.
• Social protection — Support 250 million women with these programs, especially the poorest and most vulnerable.
• Financial inclusion — Provide 80 million more women and women-led businesses with capital.
ICYMI: World Bank makes progress on gender parity, but future remains unclear
Listen: Will the World Bank's new gender strategy be able to bridge the gap?
+ Explore our coverage of the World Bank-IMF annual meetings.
Sweating the small stuff
Jake Sullivan — U.S. President Joe Biden’s national security adviser — called for a “Marshall Plan style effort” for emerging and developing countries this week, with a particular focus on the clean energy transition. Sullivan said the “billions to trillions” agenda “may sound lofty and unachievable, but there is a very clear path to get there without requiring anywhere near that level of taxpayer dollars.”
For starters, he said, the U.S. Congress needs to approve some funds and make some legislative fixes to get the ball rolling.
That includes providing the $750 million the administration requested from lawmakers to boost the World Bank’s lending capacity by $36 billion, and tens of millions to support a new IMF trust fund that could help unlock tens of billions in lending.
“We need to focus on the big picture. Holding back small sums of money has the effect of pulling back large sums from the developing world, which also, by the way, effectively cedes the field to other countries like [China],” he said. “There are low cost common sense solutions on the table, steps that should not be the ceiling of our ambitions but the floor.”
The U.S. also needs to improve its own tools, including making the U.S. International Development Finance Corporation bigger and granting it new authority to be “nimbler” and “faster,” improving the Export-Import Bank and reauthorizing the African Growth and Opportunity Act, a key trade policy, Sullivan said.
“This provides a once in a decade opportunity for America to strengthen some of its most important tools of economic statecraft,” he said.
+ The upcoming U.S. election holds enormous significance for global development especially because the country is the world’s largest aid donor. On Nov. 12, a week after the election, Devex will host a roundtable of experts to discuss what the outcome would mean for the future of U.S. foreign aid. Register now to join the conversation.
In other news
Thursday’s pledging conference in France raised $1 billion for Lebanon. [Reuters]
A climate report released yesterday warns that, without rapid action, the world is set to become approximately 2.6 to 2.8 degrees Celsius warmer by the end of the century. [New York Times]
U.S. Secretary of State Antony Blinken on Thursday announced an additional $135 million aid package for Palestinians. [VOA]
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About the author
Michael Igoe@AlterIgoe
Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.
