Devex Newswire: Banga aims for $100 billion in IDA replenishment

So far the World Bank-IMF Spring Meetings have been fairly understated, though the bank’s to-do list is quite long. World Bank President Ajay Banga has a lot on his plate, especially as he works to move the bank from ideation to action in the midst of global uncertainty, unrest, and continually rising public debt.

Also in today’s edition: We talk to Eric Pelofsky of The Rockefeller Foundation, and explain a little about callable capital.

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Springtime means shenanigans

The Spring Meetings kick off in earnest today with the usual mix of suited and booted hoping to set the world to rights, soak up the D.C. sunshine, and make a few deals at the same time.

There’s a lot at stake, much of it focused around reforming the World Bank — which celebrates its 80th birthday this year along with the anniversary of the Bretton Woods conference that created it — and figuring out how to shake up other multilateral development banks in the hope they will lend more and take on more risk.

Banga must get buy-in to make headway in the coming months for his vision. There’s also a big push around global public goods, fundraising for the world’s poorest countries, and of course climate change.

Read: Everything you need to know about the World Bank's reform plans (Pro)

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Banga bucks

As World Bank president, Banga must be good at math and he’s hoping it adds up to $100 billion for this year’s International Development Association replenishment — the fundraising round for the bank’s critical lending arm for low-income countries.

At an event yesterday, Banga said that if IDA’s donors can put together around $28 billion to $30 billion, then the bank’s ability to leverage those funds on capital markets by up to four times would put the headline replenishment number north of $100 billion — a “very helpful” amount, he said.

It won’t be easy. Official development assistance is “constrained,” Banga said. Pair that with the fact that multiple other funds and organizations — including new arrivals on the scene — are passing the fundraising hat around this year.

“We are an instrument of the ambition of our donors. I can’t fabricate money out of thin air. I can do things with balance sheet optimization. I can do it even better … but there’s only so much,” Banga said.

“The ambition of the developed world is what’s going to make a difference to everybody,” he said.

Related: World Bank's Banga wants 'largest of all time' IDA replenishment

What do we want? When do we want it?

Climate change, as usual, attracted protestors to the meetings. “Frack you IMF” and “IMF is burning Argentina,” were projected onto the side of the IMF building. It looked rather nice all lit up in blue neon, but the message by Recourse was clear — the International Monetary Fund is a hypocrite.

The fund, Recourse says, professes to incorporate climate change into its policies. But in crafting economic stability strategies, the advocacy group claims the fund urges nations to further rely on fossil fuels, the primary driver of rising global temperatures. This dynamic is particularly evident in big-time debtor Argentina, which owes a hefty $44 billion, Recourse says.

Anyway, if you’re in D.C. and fancy joining the throng, bring your fog horn because there are more protests scheduled during the week. Global activists plan to greet leaders as they enter the World Bank for the IDA Forum this morning.

You’ll need to come dressed as a G7 member — whatever that means — and wear a mock bobblehead mask, apparently. The protest, organized by Glasgow Actions Team, will call on leaders from the Group of Seven leading economies to massively replenish the fund to “invest in building a greener, more resilient world.”

Then tomorrow, there’s a “retirement party” for Axel van Trotsenburg. Outside the World Bank, activists will protest the senior managing director’s long tenure and urge him to stand down.

And my favorite — on Friday at noon there is a Star Wars-themed protest alongside dozens of groups from around the world. Please send photos if you attend; I'm intrigued.

Don’t call me, I’ll call you

Back to the reforms. “More incremental than we would hope.” That’s how Eric Pelofsky of The Rockefeller Foundation describes his expectations of the World Bank overhaul. He echoes many experts who worry that Banga isn’t moving fast enough or boldly enough to tackle mammoth challenges such as climate change and debt distress.

“None of the complexity associated with making changes in this system has gone away. And the thing that often gets you moving faster is the urgency of the crisis, and I don't think that urgency has been completely internalized,” says Pelofsky, who is deputy chief of staff and vice president in the Rockefeller president’s office.

He tells Devex Managing Editor Anna Gawel that one area he does see potential progress is on callable capital, which is … well, it’s complicated. Check out our nifty explainer that can explain it better than I can.

Pelofsky, who served 16 years in the U.S. government working on issues ranging from the Middle East to nonproliferation to the United Nations, is not as sure about the debt that’s weighing down lower-income countries. “Look, we've got to try something new on debt. Absolutely. We're not moving the needle dramatically,” he says, advocating for adjusting the bank’s equity-to-loan ratio from 19% to 17%. “That would put another $80 billion in play,” he says.

He’d also like to see a healthy replenishment for IDA, but he’s skeptical. He tells Anna that it appears Banga would like “somewhere in the neighborhood of $6 or $7 billion more than what was delivered last time. And that's viewed as a huge leap — and yet, the numbers they need are at least that much. And so you know it's a problem.”

ICYMI: Call me, maybe? How callable capital can increase development lending (Pro)

A concerted effort

As noted, callable capital is complex. But it’s basically funding that shareholders have committed to institutions and tied to certain conditions — to prevent them from defaulting, Devex Senior Reporter Adva Saldinger tells me.

In what appears to be an effort to get credit rating agencies to consider their assessments of MDBs differently, several regional institutions released reports on their callable capital, acting on recommendations from the G20.

The Inter-American Development Bank, the European Bank for Reconstruction and Development, the African Development Bank, and the Asian Development Bank all released reports outlining how shareholders would respond if they were asked for that callable capital.

Why is that important? If ratings agencies consider callable capital in their assessments, it could allow them to keep fewer reserves on hand and lend more all while keeping that coveted AAA rating, Adva explains.

The IDB report found that all of its shareholders consider callable capital obligations legally valid and binding. The IDB board could make a call on the capital, but it’s a “highly remote scenario” according to a reverse stress testing exercise the bank did to test its financial policy framework.

If you want to dig further into the wonderful world of callable capital, read Chris Humphrey’s opinion piece for Devex. He describes the World Bank’s callable capital — and that of other MDBs — as the ultimate unknown quantity, but it shouldn’t be.

Opinion: How callable capital can be used to grow MDB lending capacity

‘Tantalizingly vague’

It's been about a year and a half since the World Bank kicked off its revamp. But what exactly has it achieved so far, and what's still to do? Adva tackles those questions in the first episode of a special edition podcast this week.

She speaks to Clemence Landers from the Center for Global Development to help parse what the bank has achieved and break down the paper released last week by the Development Committee, which she called “tantalizingly vague.”

She also chatted with Kevin Gallagher from the Global Development Policy Center at Boston University about the tension between borrower countries and shareholders, and with Stephanie von Friedeburg of Citi about how the World Bank could reform engagement with private financial institutions.

You’ll also hear from Rep. French Hill, a Republican from Arkansas, about the odds of the World Bank raising more money from the U.S., and what commitments it needs to make to get the money.

Listen: Unpacking World Bank reforms — progress and path forward

ICYMI: US Rep. French Hill calls for a rethink of World Bank's climate mission

+ Join Adva as she talks to a variety of stakeholders for our podcast this week. Stay tuned for more episodes.

In other news

A U.N.-supported event secured nearly $630 million for Ethiopia's humanitarian crisis, though it fell short of its $1 billion target. [The Washington Post]

The European Union and 13 governments called for the quick ratification of a U.N. treaty aimed at safeguarding the world’s ocean from overfishing and other human-induced harms. [Reuters]

Young leaders worldwide are discussing their visions and actions for sustainable development at a U.N. forum in New York, focusing on five Sustainable Development Goals. [UN News]

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