The World Bank’s efforts to reform its spending and increase lending to help combat climate change were one of the main topics of concern at the annual meetings of the bank and the International Monetary Fund (IMF) in Morocco last week.
US Treasury Secretary Janet Yellen said in a speech during the meetings that the World Bank needs to have a “cultural change” in order to mobilise private sector capital, even as it has made progress in addressing climate change and other global issues.
“This will require internal process improvements that increase agility and speed up decision-making without sacrificing quality, as well as cultural change to accelerate private sector mobilisation and responsible risk-taking,” she said.
Yellen said the Treasury had made efforts over the last year to help multilateral development banks (MDBs) like the World Bank evolve and address global challenges including climate change.
“It is crucial that the World Bank robustly implement the evolution reforms that have been adopted, complete work on those currently underway – like the concessionality framework and measures to increase speed and agility – and begin work on reforms that have not yet been taken up,” she said.
She urged the World Bank to incorporate a share of callable capital into its capital adequacy framework, as well as implement private capital reforms to include incentives for staff to mobilise private capital, and increase the quality and accessibility of data. She also said the bank should screen projects for climate benefits to adapt to the effects of climate change, and that it is “critical that climate finance be targeted efficiently”.
More should be done to maximise the capabilities of the World Bank to support infrastructure development, and they should assess how they can do a better job of helping countries access climate finance, Yellen added.
Access to capital
Meanwhile, World Bank president Ajay Banga said he is working to streamline the bank’s process and speed up decisions. He is also open to using the IMF’s special drawing rights (SDRs) to increase lending to fight climate change, he told Reuters on the sidelines of the annual meetings.
SDRs are international reserve assets created by the IMF in the 1960s to supplement member countries. While some SDRs from wealthier countries have been shifted to poorer countries, the assets have never been moved to a multilateral development bank.
While he is open to the idea, Banga is skeptical that it will be possible to access the IMF’s reserve assets, and there are other ways for the bank to lend.
“I’m very open to finding a path. I just believe that it is a difficult place to get to,” Banga told Reuters. He had previously said he was not in favour of the idea, and that it would put the World Bank at risk as some central banks are required by law to hold SDRs as liquid reserve assets.
“I would love it if the IMF and the world changed the rules and said SDRs can be used by the MDBs,” he told Reuters. “I would be the first in the queue to get them.”
Banga is under pressure from leaders and stakeholders to find a way to increase lending to scale up the transition to a net-zero economy, as well as other issues. There is a large climate finance gap, with only 16% of climate finance needs being met, according to the Rockefeller Foundation.
The World Bank needs approval from shareholders to increase its capital. Banga has laid out plans to try to squeeze out as much lending out of the bank as possible over the next year and half, including adding another US$106bn in lending over 10 years.
Separately, Benga called for discussions around the subsidies spent on the agricultural, fuel and fisheries – which have a US$56tn environmental impact – as a way to get funds to address climate change, noting that it was not a popular topic given its political nature.
This page was last updated October 17, 2023
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