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Forum: Five crucial tasks for new World Bank president

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
June 2005
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Incoming World Bank President Paul Wolfowitz faces five crucial tasks if he is to successfully reshape the development institution to address the problems of the 21st century, according to a June 1 report by the Washington-based Center for Global Development. These include (1) revitalizing the World Bank’s role in China, India, and the middle-income countries; (2) bringing new discipline and greater differentiation to low-income country operations by providing more financing to better-governed countries and suspending financing to countries where progress has stalled; (3) obtaining an explicit mandate, adequate grant instruments, and a special governance arrangement for the Bank’s work on global public goods; (4) taking leadership to ensure truly independent evaluation of selected Bank and other aid-supported programs; and (5) pushing member governments to make the Bank’s governance more representative and thus more legitimate.

The report,” The Hardest Job in the World,” was prepared by a group of 20 well-known development experts headed by Nancy Birdsall and Devesh Kapur. It underlines that borrowing from the Bank by middle-income countries, as well as China and India, has dropped dramatically, and it pins the blame on the high “hassle costs” of obtaining financing through the World Bank. The Meltzer Commission, in a report to the U.S. Congress in 2000, recommended that the Bank stop lending to emerging market and middle-income countries that can readily access private capital markets. But the group’s report says the fall in lending to these countries could pose a number of risks to the Bank, including reduced income from lending operations and increased costs of borrowing because of heightened portfolio risk. It recommends that the Bank make it easier for middle-income countries to borrow by creating loan facilities that could be accessed more quickly.

The report suggests greater differentiation in dealings with low-income countries. Well-run countries should get large amounts of financing, with commitments for five years or more. Countries with annual per capita incomes under a certain threshold (possibly $500) should get help mostly through grants. In poorly governed countries, the Bank should remain engaged by providing carefully targeted technical assistance but should not generally provide financing to the government.

The report also calls for a new trust fund to support the Bank’s work in promoting global public goods, particularly in agriculture, health, and the environment. It recommends giving borrowing countries a greater say on the Bank’s executive board. And it calls for an external, independent aid evaluation mechanism.

Wolfowitz appears to agree with at least some of the advice. He has promised to make the Bank more attractive to fast-growing economies like India and China, where many people remain poor despite booming economic growth, and has singled out corruption as a major problem in development. Identifying Africa as his top priority, he has also signaled that he would put renewed emphasis on developing infrastructure in poor countries. “Development is about a lot more than pouring concrete,” he has acknowledged, “but on the other hand, it’s pretty hard to have development without roads and electricity and fundamental infrastructure, so it’s got to be part of the picture.”

Laura Wallace

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The Hardest Job in the World: Five Crucial Tasks for the New President of the World Bank is available at http://www.cgdev.org/docs/HardestJobintheWorld.pdf.

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