World Bank says half of proposed $400 million savings found

The World Bank says that it has found more than half of the $400 million in budget savings that President Jim Kim proposed last year as a part of an effort to make the bank leaner and more efficient — and initial information suggests that the cuts will affect the financial institution’s staff and external consultants as well as partners. Savings will result from changes to corporate procurement and the engagement of external consultants as well as a reduction of the bank’s real estate “footprint” in Washington. The “overall objective,” according to a memo posted on the bank’s Intranet last week by Chief Financial Officer Bertrand Badre, is to “grow” the World Bank Group and “strengthen its financial base.” Savings resulting from the expenditure review effort will “stay within the WBG and allow us to provide more and better services to our clients,” Badre wrote. These measures amount to $108 million, although not all of the savings will be realized in the coming fiscal year, according to the memo. When added to the $100 million in cuts that the bank announced in January, the bank says a total of $208 million in budget savings have been found. Budget savings from corporate procurement will include the rebidding of major contracts and renegotiation of smaller contracts over the next three years. The bank also plans to “rationalize” its use of information technology consultants and renegotiate wireless plans for employees. The memo also outlines changes to the payment of consultants that are meant to “strengthen the governance around rate-setting for all consultants (including retirees) focusing on rates above the Market Reference Point (MRP).” Rates for consultants above the reference point will need director-level approval and retiree fees above that point will need approval from a vice-president. In an announcement with larger implications for permanent staff, the bank says it is moving forward with plans to reduce the size of its sprawling headquarters a few blocks from the White House. That plan could include a satellite office somewhere in the Washington, D.C., metro area outside of the expensive downtown business district. Management has also said that the bank plans to have a smaller number of staff members in the future, which would also lead to reduced office space. According to the memo, implementation of the real estate plan would take place over the next four years, and savings would begin to accrue in fiscal year 2019. “Staff will be kept involved as plans evolve,” Badre stressed. While the “expenditure review” is widely seen as a necessary step to trim the bank’s bloated operating budget, the details of the cost-saving measures have been viewed with wariness by staff. The near-certain prospect of significant staff cuts in coming months also looms large at the institution. The first round of budget cuts that were announced in January included changes to retirement benefits, restrictions on travel, including a requirement to fly coach when traveling for training or when the flight duration is less than five hours, and the elimination of parking subsidies for employees. The operating budget is paid for by interest charged on loans to middle-income countries, and the bank plans to put savings toward increasing lending. For every $100 million the bank saves and reinvests, it will be able to lend $1 billion more for development, according to Badre. That planned reinvestment of savings is part of a larger plan to double the bank’s lending to middle-income countries. President Kim has said the budget exercise is a “matter of integrity.” “I believe very strongly that we had to get leaner before we got bigger,” he told a crowd at the Council on Foreign Relations in April. Read more development aid news online, and subscribe to The Development Newswire to receive top international development headlines from the world’s leading donors, news sources and opinion leaders — emailed to you FREE every business day.