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David Malpass quits bank as radical changes loom

The World Bank President's early exit triggers succession race and fires up debate over reform

The resignation of World Bank President David Malpass a year before his term expires in April 2024 was well received by United States Treasury Secretary Janet Yellen who had been prodding the institution to step up its efforts on climate finance and debt relief programmes.

Relations between Malpass, an investment banker appointed by President Donald Trump, and the US Treasury had languished since Joe Biden assumed the presidency in 2021. Treasury was particularly frustrated by Malpass's comments last September questioning the scientific consensus that human fossil fuel consumption was a leading cause of climate change (Dispatches, 5/10/22, Under fire, Bank chief pushes back on his climate record). He later said that his remarks had been misinterpreted.

A month later, Treasury called on Malpass to draw up an 'evolution road map' to boost the Bank's financing capacity, especially to countries hardest hit by climate change. Treasury officials say Yellen was reluctant to push out Malpass, although other shareholders would have backed such a move, as it would have been seen as partisan and could have created a precedent in Washington DC.

As the biggest shareholder of the World Bank, the US has an effective veto over the appointment of its President. As a quid pro quo, European states have, until now, been given a free run to choose the managing director of the IMF. This 70 year-old monopoly of top international finance posts between rich western states is under heavy fire from economic officials in Africa, Asia and Latin America.

After her ten-day trip to Africa in January, Yellen reiterated her push for reform at the Bank, calling for it to 'expand its vision to include addressing global challenges' and cut financing costs, doing more to mobilise private finance. The Bank should start to maximise the use of its current financial resources, argued Yellen, by implementing some of the reforms put forward in a report commissioned by the G20.

For all its talk of reform, the US Treasury Department is said to be seeking another US citizen to replace Malpass, albeit one with stronger credentials on climate action and development finance.

Candidates in the running so far all have US citizenship and include:

  • Rajiv Shah, head of the Rockefeller Foundation and former head of the US Agency for International Development (USAID);
  • Samantha Power, former US ambassador to the United Nations, current head of USAID;
  • Mafalda Duarte, chief executive officer of the $11 billion Climate Investment Funds;

The choice of President will be complicated by the accompanying need for sweeping reform of the Bank and other international financial institutions. The US will be under pressure to break the tradition of appointing one of its own.

Pressure for institutional reform is also coming from developing economies, some led by prime minister of Barbados, Mia Mottley, who used the UN's COP 27 climate summit to spell out a radical plan to boost climate finance known as the Bridgetown Initiative (AC Vol 63 No 23, Delegates haggle in Egypt as the planet burns). Some of Mottley's supporters want to put her name forward as a contender for the Presidency of the Bank but she has shown little interest in the job so far.

It is unlikely that Malpass's replacement will be in post by the World Bank/IMF spring meetings due in April and that could further delay progress on reforming the institution.

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