Experts call for innovative ways for the World Bank to work better

The reforms that the World Bank has embarked on are critical, but there’s a lot more that can be done to unlock money and ensure it’s used effectively. That was the general consensus of a panel of experts at Devex World, which was held last week in Washington, D.C., alongside the World Bank-International Monetary Fund annual meetings. The various proposals the panelists put forth include providing funding on a regional level and doing a better job of getting it to people on the ground quickly. The majority of funding by multilateral development institutions comes in the form of loans to individual country governments. But multilateral development banks such as the World Bank should think about providing financing in different ways to address borrower needs and demands, panelists said. That could include directly funding local civil society organizations, media, and policy institutions — and providing regional lending, particularly in Africa where regional integration is critical to economic growth, said Mavis Owusu-Gyamfi, president and CEO of the African Center for Economic Transformation. “Growth and transformation of the African continent is going to happen through regional integration,” she said during the panel event. “It is going to happen through our ability to work with each other and trade with each other and build regional value chains.” “Such a small percentage of the bank's money goes to that regional agenda. So I would like to see an ability to work at that regional level … because … African governments are saying we need regional integration. Let's help them make it a reality,” she added. MDBs also need to ensure that decision-making happens at the local level and is responsive to local needs. “This notion that the rich countries will go and save poorer countries is not true,” said Ani Dasgupta, president and CEO of the World Resources Institute. “Every country's transition is going to be different. We have to recognize that and kind of build with the country where they want to go, what they want to prioritize, what the politics are.” That local input should be reflected in the discussions around the replenishment of the International Development Association, or IDA, the World Bank’s fund for the lowest-income countries. Borrowing countries can share their priorities as part of that process, and thus far there has been more emphasis on local decision-making than in the past, said Owusu-Gyamfi. While World Bank President Ajay Banga has called for this IDA replenishment to be the biggest one ever, panelists emphasized that it’s not just how much money the bank raises, but how it’s used. “The conversation is all about how much more we can get. We need to focus on how we use the most precious capital we have,” Dasgupta said. “How do we ensure that the money is used effectively?” asked Owusu-Gyamfi. “The first one is timelines. Currently, it takes between six months to three years for an agreed fund to be released. By the time it gets to a country, the world has moved on, so the country is spending money within an agreement, in a framework, that has changed radically. So we welcome the ambitions of the World Bank’s evolution road map to speed up the timeline.” That road map aims to not only speed up projects, but streamline the bureaucracy and use innovative financial instruments to stretch the balance sheet and increase lending. “It's important to give credit where credit is due,” said Pepukaye Bardouille, special adviser on climate resilience to the prime minister of Barbados and director of the Bridgetown Initiative. “So I think the bank’s move … to reduce its equity-to-loan ratio from 19% to 18% is great, right? That's, I think, a really good way to unlock capital.” In fact, the Bridgetown Initiative wants to take that further and recommends that the bank reduce the equity-to-loan ratio an extra percentage point, to 17%. The IMF also recently announced a reform package that will reduce the surcharges some borrowing countries are required to pay. “I would say that’s progress, but we’re not anywhere close to where we need to be,” said Bardouille. “The reality is, we need more finance, and we need cheaper and longer-term finance.” “How do we make the instruments more easily accessible and implementable?” she continued, adding that we not only need more instruments, but also more innovative ways of using the ones we already have. “Perhaps 80% of the puzzle pieces are in the box, but there are some tweaks and nuances that are really pretty critical,” she said, stressing the necessity of longer maturities — 30- to 50-year loans for example. She said that in the short term, other sources of financing will have to step in, whether that’s domestic capital or taxes. “It doesn’t matter how much the MDBs unlock for the next three to five years, it won’t be enough,” Bardouille said.