Early this month, the U.S. Department of the Treasury established a new office dedicated to improving and monitoring the lending effectiveness of multilateral development banks. Hopes are high in Washington that such an office will strengthen oversight of social and environmental safeguards, bolster U.S. interests abroad, and improve communication between MDBs, U.S. government bodies and civil society organizations.
But how effective will it be?
According to an email received from Treasury, the Office of Development Results and Accountability is designed to work closely with staff at U.S. executive directors’ offices, the donor country’s representatives at multilateral banks. It will also be coordinating with other offices in the Treasury to develop voting positions in line with U.S. development interests and MDB priorities.
The new office was created with the idea of consolidating various elements of the U.S. Treasury Department already experienced in MDB affairs into one cohesive team. It consists of a director and seven staff members.
Such an office should be welcomed to the extent that it improves coordination within the U.S. government, according to Paul Cadario, senior fellow at the University of Toronto’s Munk School of Global Affairs and a former senior manager at the World Bank.
“It’s always good that an important shareholder, an important contributor to the achievement of development goals, [tries] to bring together in one place its oversight of the important shareholdings that they have,” Cadario told Devex, adding that the new office could simplify communication between the Treasury Department and other development-focused U.S agencies, such as the U.S. Agency for International Development and even the State Department.
A major shareholder in six multilateral development banks, the United States is the largest shareholder at the world’s biggest MDB, the World Bank.
3 short-term priorities
The new office will have Dan Peters, a former senior adviser at the U.S. executive director’s office at the World Bank, as its director. According to Treasury, Peters focus now is on three short-term priorities.
His first priority is to strengthen the review and oversight of project lending by monitoring a subset of MDB projects after approval by the board. The office will monitor projects whose development impact they deem greatest, as well as projects in which they identify potential risks. The office will also review “projects and country assistance strategies” prior to a board decision to assess their “alignment with U.S. strategic priorities” and “verify that the MDBs comply with their own policies and procedures.”
The second near-term priority is to establish oversight of safeguard policies with a particular focus on the World Bank safeguard review. A Treasury representative emphasized that this was a key priority for the Treasury Department and for the new office in particular. An email received from Treasury explained that the new office seeks to “advance positive environmental and social outcomes by ensuring that the MDBs have in place appropriate environmental and social safeguard policies as well as robust systems for addressing the negative impacts of MDB lending when they arise.”
“The MDBs are always looking for ways to improve their safeguard policies,” Peters told Devex, “and I think that this office will be a way to help incentivize greater improvement.”
Lastly, Peters’ team seeks to engage with civil society, Congressional staffers, MDB officials and other stakeholders. ODRA promises to “provide timely feedback to the MDBs on the positive and negative aspects of selected individual lending operations” and “discuss broader trends in MDB lending with the MDBs and other relevant parties.”
“It is … good that someone who is familiar with the internal workings of the World Bank Group … has been appointed to head this office,” Munk School of Global Affairs’ Cadario said, underscoring the importance of understanding how things work at the financial institution.
A few caveats
But Cadario did raise some concerns about ODRA.
He cautioned that if the new office overstepped the existing U.S. representatives at the World Bank or other MDBs, it could result in very mixed signals from the United States within the walls of these institutions.
“One would hope that this isn’t going to lead to confusion,” Cadario said, pointing out that a new overseeing body risks overwhelming MDB staff and management with inquiries. He also underscored that MDBs already have in place their own management and oversight mechanisms, and so understanding those is critical for constructive dialogue.
David Shaman, senior fellow at the Bank Information Center and author of the book “The World Bank Unveiled: Inside the Revolutionary Struggle for Transparency,” welcomed news of ODRA and its emphasis on results, accountability, and social and environmental safeguards.
“To the extent that a resource-constrained Treasury has sufficient capacity and that these issues see appropriate or increased attention will be welcomed,” Shaman wrote in an email to Devex. But he also raised concerns that the new office doesn’t get to the heart of U.S. interests abroad.
“However, realignment of duties and responsibilities within the department is less of a concern with civil society sources … who see a larger and more important issue: whether the U.S. government has effective leadership in place on the World Bank’s board of directors and with the boards of other MDBs,” Shaman wrote, referring to U.S. President Barack Obama’s nomination of Matthew McGuire as U.S. executive director at the World Bank — a nomination still awaiting confirmation by Congress.
“The current vacancy for the U.S. executive director does not serve U.S. interests and there is a sense from key civil society actors that what resources the administration has to spend should be directed toward moving nominees through the confirmation process so the U.S. will be fully represented on these pivotal development bodies,” the senior fellow and author noted.
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