Biden Welcomes New World Bank Chief

2023-05-03

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WASHINGTON —President Joe Biden is hailing the new head of the World Bank as a "transformative" leader who will integrate climate change into the list of challenges the lending institution faces in its work with developing countries.

On Wednesday, executive directors of the World Bank selected Biden's nominee, Ajay Banga, to lead the institution. The India-born naturalized American citizen is a former credit card executive.

"Ajay Banga will be a transformative leader, bringing expertise, experience, and innovation to the position of World Bank president," Biden said in a statement. "And together with World Bank leadership and shareholders, he will help steer the institution as it evolves and expands to address global challenges that directly affect its core mission of poverty reduction-including climate change."

The World Bank's current president, David Malpass, resigned in February amid calls for his removal over remarks in which he appeared to downplay the role of human actions and fossil fuels in creating climate change. He will depart in June, with less than a year left in his five-year term.

The bank's board said in a statement that they look forward to working with Banga, the former CEO of Mastercard, "on all the World Bank Group's ambitions and efforts aimed at tackling the toughest development challenges facing developing countries."

Cornell professor Richard Clark, who studies policymaking at the World Bank, says Banga "faces pressure to reorient the World Bank's lending portfolio to tackle climate change more aggressively. He could do this in several ways, but each has its pitfalls."

Clark laid out three options in a Cornell University press release: Banga could ask member states for more resources, but the U.S. Treasury chief has said she will oppose the move.

Secondly, he could loosen the bank's capital requirements - the amount of liquid assets a bank is required to hold - but that could challenge the bank's credit rating.

And finally, Clark said, Banga could reallocate funds to support climate initiatives, by moving money away from poverty reduction and infrastructure projects. But low-income countries - which prioritize growth - oppose the idea.

"More generally, developing nations have long been frustrated with the fact that the World Bank is governed primarily by rich Western countries who may put their own needs ahead of those of the developing world," Clark said in remarks earlier this month.

The American president conventionally nominates the winning candidate, though any member nation can nominate someone. The United States is the largest shareholder in the bank, and the largest donor to a sub-group of the bank that Banga will also control, the International Development Association.

The board said the process of choosing Banga - which included a four-hour interview on Monday - "included an open, merit-based, and transparent nomination where any national of the Bank's membership could be proposed by any executive director or governor through an executive director."

But the selection was not without diplomatic drama. News agencies reported that one of the board's 25 members - Russia's Roman Marshavin - abstained from the vote, though the remaining 24 members supported Banga. State-run Russian media reported that Marshavin told them he had been in talks with other countries about alternative candidates, including some Russian financiers.

When asked about the vote, a senior Biden administration official said the administration is happy how it turned out.

"Ajay was elected with resounding approval from the executive directors and will start his mandate with incredibly strong support from the membership of the World Bank," said the official who declined to be identified in a routine background briefing with reporters.

The bank has also faced criticism from fiscally conservative Americans, who disagree with some of its lending policies.

"At the World Bank, China continues to receive billions in loans, even though it should not be eligible based on its income level," said Brett Schaefer, of the Heritage Foundation's Margaret Thatcher Center for Freedom.

China, the bank's fifth-largest debtor, has repaid a substantial amount of its outstanding debt in recent years and moved from second place in 2010.

China began working with the World Bank in 1980. At the time, the bank considered China a lower-income nation.

By World Bank's measure, China is now within reach of attaining status as a high-income nation.

India is the bank's largest debtor and has been for more than a decade.

Banga starts work on June 2.