A leaked draft of the World Bank’s “Evolution Roadmap” has revealed a relatively cautious 2023 reform agenda. Re-orienting the Bank to address cross-border challenges such as climate change is a step in the right direction. However, the timeline and level of ambition for changes to the Bank’s lending model and financial capacity are left open for debate. The Roadmap needs to set out how the Bank will evolve further and faster to confront the polycrises of the 21st century.
Changing the vision and operating model of the World Bank could be a big deal. The institution has spent nearly 80 years rebuilding countries, developing projects, and pulling people out of poverty. Some of these gains are at real risk of being reversed, however, as spiralling debt, inflation, climate change, and COVID-19 have thoroughly upended the traditional development model. The World Bank must now play a lead role in preventing such backsliding. As such, this giant institution is being prodded to rethink how it does business for the global good. Hence the shareholders asked for, and so the Bank produced, a roadmap for evolution.
The unreleased document, “Evolving the World Bank Group’s Mission, Operations, and Resources: A Roadmap”, lays out a year-long timeline for consultation, proposals, evaluation, and adoption of reforms, likely pushing implementation to 2024 and beyond. Crucially, it places global public goods (such as decarbonization and pandemic preparedness) squarely within its remit, recognizing that increased concessional lending to large, Middle-Income Countries (MICs) will be critical to addressing global challenges. This was a key recommendation made by E3G and CSIS in our co-authored Shadow Roadmap briefing paper, published last month.
Developing countries need additional finance to tackle climate and pandemic needs, without sacrificing existing poverty reduction efforts. They also shouldn’t have to pay exorbitantly high interest rates, currently 10-20% in some cases, to do so. To deliver this shift in vision, the Bank has floated the idea of an International Bank for Reconstruction and Development (IBRD) concessional fund. The scheme has potential, but wary observers caution due diligence will be required to avoid joining the ranks of too-small Bank trust funds that have yet to deliver at scale.
The draft truly runs afoul, however, in its bargaining chip approach. In effect, it reads like a lowball opening offer of reforms the Bank will consider if only shareholder governments would commit to a donor capital increase. Given the slim likelihood of that happening soon, the negotiating tactic here is entirely backwards. Strong Bank leadership would have done better to lay out a vision for the level of lending, risk, and activity it must undertake to address global development challenges, and then negotiated on funding it from a position of high ambition.
Furthermore, by not explicitly committing to immediately adopt the G20 Capital Adequacy Framework (CAF) recommendations, or even mentioning SDR recycling, the Bank is leaving stones unturned in its effort to increase its lending capacity. It is not clear why – is this due to tensions between different departments inside the Bank itself? There will be time to discuss guarantee structures, securitization, equity positions, and the host of financial innovations the Bank could use to optimize lending, but the CAF items should be prioritized as some of the quickest and most effective reforms to scale capacity as soon as possible.*
The Roadmap poses many questions for Bank directors to consider regarding the direction, magnitude, and appetite for change, and even sets out a (long) timeline to discuss them. But it doesn’t yet have a destination in terms of where it wants to be in five years’ time. Ultimately, determining one will depend on strong shareholder leadership. In a world of increasing mutual interdependence, a global polycrisis cannot be resolved without bold vision from global leaders. Our representatives must hold the World Bank accountable for producing a roadmap to a climate safe future, because the Bank has the potential to be the major vehicle to realize it. That would be a big deal.
For further analysis of the World Bank’s Paris alignment process, see E3G’s Public Bank Climate Tracker Matrix.
* Update: on Friday 13th January, the Bank issued an ensuing Roadmap press statement, mentioning CAF as an item for consideration, but still no timeline for adoption has been given.