an 23 FebA week after David Malpass announced his resignation as president of the World Bank, and just hours after the bank announced that the search for a successor would take months “open, merit-based and transparent,” everyone knew who would win. Ajay Banga, the former head of MasterCard, has been nominated by the White House, making him the leader in waiting for the lender. Mr. Banga, a naturalized American who was, in his words, “Made in India,” and a private entrepreneur, represents a departure from tradition.
However, emerging economies did not consider his candidacy a victory. The White House has chosen every World Bank president since it entered into a gentlemen’s agreement with Europe, which one to choose imfPresident, in 1944. America also has a huge share of the vote in the Bank. This made sense after World War II. Now countries from China to Panama want their growing presence in the global economy to be reflected in their institutions.
Panga’s first task will be to address the infighting. The same tensions extend to disagreements over the bank’s role. America and Europe want to lend more, with looser restrictions, to ease the burden of high interest rates, climate change, and reduce Chinese lending to poor countries. But some emerging economies are holding back, saying such a move would risk the organization being too secure aa Credit rating. Without additional capital, the bank has huge gaps in its coverage. Its officials have been quiet about rebuilding Ukraine, and have struggled to pump as many regional groups as possible into the green infrastructure.
Another battle is over debt relief, which China has stopped by insisting that the World Bank write off its loans. Malpass has so far stuck to his position, replying that this would weaken the bank’s ability to lend. A more belligerent China reduces the chances that US policymakers will agree to give Beijing more votes anytime soon.
Some are suspicious of Mr. Banga (a member of the board of directors of Exor, which owns a stake in The Economistparent company) is capable of the bureaucratic maneuvers needed to break the deadlock. He would be the first appointee without full-time experience in development or government since James Wolfensohn, a banker and lawyer, in 1995. But Panga’s career could be an advantage. After more than a decade on Wall Street, he oversaw Mastercard’s rise from a $20 billion credit card company in 2009 to a $300 billion payment platform. It is well placed to guide work on digital payments, which is a priority at the bank. And he has a reputation for turning unwieldy organizations into slimmer outfits.
Banga may finally help the bank embrace a green agenda. In September, Malpass dodged a question about fossil fuels and global warming, saying he was “not a scientist.” In January, Western countries rejected the bank’s climate plan for not being ambitious enough. By contrast, Panga at Mastercard writes very green blogs. The hope is that he will use his knowledge of Wall Street to get companies to funnel money into green technology and infrastructure.
America’s ideal international bank is a well-oiled machine with sustainable bent, like the Mastercard Mr. Banga left behind. Before he repeats the trick, the new president will first have to stop the routine infighting by pushing emerging economies to their side. To do this, he will have to make them forget the unfair circumstances of his choice. ■
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