David Malpass, president of the World Bank. Photo: Simone D. McCourtie / World Bank / CC BY-NC-ND

WASHINGTON — The World Bank Spring Meetings, which concluded on Sunday, might have lacked the policy significance that accompanied last year’s negotiations over the terms of the institution’s capital increase, but they did offer something else: a first glimpse of David Malpass as the bank’s president.

When the institution’s new leader stepped into the atrium last Tuesday morning to address World Bank staff for the first time, he faced a room full of employees and partners looking for reassurance that he will not upend the institution or rewrite its priorities. Many of them were also hoping to see a different kind of leadership than what they witnessed over the last six years.

In World Bank debut, David Malpass looks to win over staff and critics

Malpass convinced the World Bank's shareholders he is the right man for the job. At the bank's spring meetings, can he win the hearts and minds of his own institution?

When Malpass uttered the words “climate change” — an issue that had driven a wedge between his background in the Trump administration and his mandate at the bank — there was an almost audible sigh of relief. His general demeanor, at times unpolished and stumbling over his words, seemed to take the edge off a figure said to have “the most hard-edged biography of any past World Bank president.”

Addressing staff — and then later members of the press — Malpass appeared at pains to show he has little appetite for the kind of organizational shake-up former president Jim Kim undertook early in his first term. Instead, Malpass littered his remarks with references to the bank’s “twin goals” and liberally praised staff and his leadership team.

“I am honored to be joining you this morning as World Bank Group President. I am also grateful to work with such a strong team of talented and dedicated development professionals,” Malpass said on Thursday in his first press conference.

The new president’s understated debut quickly met the reality of an institution facing challenges on multiple fronts.

The International Monetary Fund set the scene with grim global economic forecasts. The bank’s Africa Chief Economist Albert Zeufack said the continent’s “sluggish growth” meant the continent was “moving backward in per capita terms” and issued warnings about dangerous debt levels in some countries.

US lawmaker threatens World Bank capital increase over private sector concerns

Rep. Maxine Waters told U.S. Treasury Secretary on Tuesday that unless the World Bank shows greater transparency, her committee will not prioritize a capital increase for the bank's private sector arm.

The bank’s popular CEO Kristalina Georgieva, who was briefly interim president, is rumored to be considering moving on. Senior staff are still getting their bearings after Georgieva announced a shake-up days before the meetings started, and a powerful U.S. lawmaker threatened to hold up the multibillion dollar capital increase over concerns about the bank’s private sector investments.

Malpass, multilateralism, and China

One of the biggest questions entering the week was whether Malpass, who in the past has criticized multilateral organizations for overreaching, would embrace his role as the president of an institution owned by 189 shareholder countries — or whether he would seek to wield that institution on behalf of the Trump administration’s agenda.

The bank’s relationship with China, and how Malpass might seek to disrupt it, has been seen as a potential flashpoint between those competing priorities.

China, which commands the world’s second-largest economy, is also one of the World Bank’s biggest borrowers, an arrangement some consider due for correction. The World Bank’s board of directors agreed that as a condition of delivering $13 billion more in capital to the institution, they would also require that middle-income countries such as China gradually decrease their borrowing and increase their contributions to the bank.

Malpass reiterated that view — strongly held by his former boss, U.S. Secretary of the Treasury Steven Mnuchin — on Thursday.

“In the capital increase that was agreed to by shareholders a year ago, it was agreed that the borrowing by China would fall below a billion dollars by the end of the country program that the World Bank does with China,” Malpass said.

While Malpass did not make any waves last week, the conversation about how the bank’s relationship with emerging economies should evolve is subject to ongoing debate. China, experts are quick to point out, does not need the World Bank’s money. In fact, the World Bank benefits from lending to a country that consistently repays loans ahead of schedule and delivers high-quality projects. What China values in the relationship is the technical assistance that accompanies the World Bank’s money — and the bank also learns from China’s experience.

“China has some lessons … and insights to share with the rest of the world,” Malpass said.

As the bank’s relationship with China evolves, Malpass will play a central role in determining whether it remains a mutually beneficial one.

IFC under pressure

Having enjoyed something of a renaissance in recent years, the bank’s private sector arm, the International Finance Corporation, was given a reality check during the meetings.

IFC’s star has been rising since 2015 with the advent of the bank’s “billions to trillions” agenda which put the private sector at the heart of development. IFC’s CEO Philippe Le Houérou launched an ambitious reform program, known as IFC 3.0, to drive the new “maximizing finance for development agenda,” and impressed the bank’s board, which last year approved a $5.5 billion capital injection for IFC. But the increase came with tough conditions including that IFC ramp up its activity in fragile and conflict-affected countries.

How IFC is dealing with pressure to boost accountability

IFC, which recently received a $5.5 billion vote of confidence from its shareholders, faces scrutiny and growing pressure as it vows to improve accountability.

But shareholder confidence in IFC has since been put to the test amid growing concerns about the development finance institution’s accountability, thanks in large part to a high-profile U.S. court case brought by a group of Indian farmers and which went all the way to the U.S. Supreme Court. This comes as experts expressed broader doubts over the private sector’s ability, appetite, and suitability to achieve the Sustainable Development Goals, especially in fragile and conflict settings.

Concerns over IFC’s performance made their way into U.S. politics last week when U.S. lawmaker Maxine Waters, chair of the House Financial Services Committee, threatened to delay IFC’s budget increase over concerns about its approach to subsidizing private investment in low-income countries.

Mnuchin urged fellow shareholders to pay closer attention to the DFI and ensure IFC’s “engagement truly catalyzes private investments that are growth enhancing and poverty reducing,” he said in a statement published ahead of the Development Committee meeting last Saturday.

Accountability in the spotlight

IFC’s brush with the Supreme Court appears to have galvanized calls to strengthen the bank’s internal accountability mechanisms — the Inspection Panel and the Office of the Compliance Advisor and Ombudsman, which are “are ripe for modernization,” according to Mnuchin’s statement. The Inspection Panel has already been partially reformed, but a number of key reforms were left outstanding.

The board will revisit these in the coming months, Jürgen Zattler, executive director for Germany at the bank, and chair of the board’s committee on development effectiveness, told Devex.

A review of CAO is also getting underway, with the U.S. and other shareholders pushing for strong reforms, including having the watchdog report directly to the board, rather than the bank’s president, and beefing up CAO’s ability to monitor IFC management’s response to recommendations.

Opinion: At IFC, accountability is of utmost importance

IFC CEO Philippe Le Houérou ushers in a new era of accountability at the DFI — one that "will require more dedicated IFC resources" and "a change in our behavior and culture."

But IFC’s Le Houérou is not waiting for the review, announcing a suite of reforms to make IFC more proactive in preventing and responding to complaints from communities. The plan, announced in Devex on Wednesday, was welcomed by civil society groups and CAO.

During the meetings, IFC also sought to position itself as a responsible investor by leading an effort to bring greater transparency, credibility, and discipline to the impact investing market. On Friday, IFC rallied 60 investors, including DFIs and commercial investors such as UBS and Credit Suisse, to sign up to nine impact investing principles designed to help build a common market standard for the sector and avoid “impact washing.”  Investors and civil society groups welcomed the principles as a good start, but said more work was needed.

“We should not fool ourselves that we have done it. This is just the start,” Bertrand Badré, CEO of Blue like an Orange Sustainable Capital and former chief financial officer at the bank told Devex.

Future priorities

While the security cordons are still coming down, discussions are already underway for the International Development Association’s 19th replenishment. Jim Kim secured a record $75 billion in 2016, but global politics have shifted dramatically since then. Bank insiders agreed that between a skeptical Trump administration, a weakened British pound, and competition from other multilateral initiatives that will be asking donors for money this year, maintaining current financing levels will be a struggle.

In another nod to continuity, the bank’s leaders created a more direct link between IDA and a key Kim-era priority, the human capital project. On Thursday, they announced that $15 billion in grants and concessional loans will target human capital investments in IDA’s next funding cycle, a 50% increase.

The bank, like many other development institutions, has grown increasingly focused on carving out a clearer role for itself in fragile and conflict-affected states, where half of the world’s poor are projected to live by 2030. The institution is currently in the early stages of creating a new fragility, conflict, and violence strategy that aims to inform the bank’s approach to bringing development investments to bear earlier in situations of protracted conflict and crisis.

Malpass noted that in the first few days of his tenure, he has been placing an “emphasis on individual country programs” as a means for thinking about how to approach development contexts that present very different challenges.

“I think each country is different, and so the mix of resources that’s going to be most effective is going to vary by country. That’s particularly true of fragile conflict states,” he said.

About the authors

  • Edwards sopie

    Sophie Edwards

    Sophie Edwards is a Reporter for Devex based in London covering global development news including global education, water and sanitation, innovative financing, the environment along with other topics. She has previously worked for NGOs, the World Bank and spent a number of years as a journalist for a regional newspaper in the U.K. She has an MA from the Institute of Development Studies and a BA from Cambridge University.
  • Igoe michael 1

    Michael Igoe

    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.