World Bank Spring Meeting First progress made towards a fundamental reform
Further substantial reform steps are to be launched in the period up to the Annual Meeting in October. The reform was instigated last autumn by Development Minister Svenja Schulze and US Finance Minister Janet Yellen. Germany was represented in Washington by Niels Annen, Parliamentary State Secretary to the Development Minister.
Annen said, “In normal times the measures that have been decided would have been considered a huge achievement. The World Bank will be able to do a lot more with its funds in the future. But, unfortunately, these are not normal times and the need for investments to address the global crises is gigantic. That is why further substantial reforms will need to follow by the autumn. The world needs a truly transformational bank that is in tune with the times in order to achieve the necessary social and environmental reshaping of the global economy. In concrete terms this means the World Bank putting tangible incentives in place for governments whose investments and policies not only drive their own development forward but also contribute towards addressing global challenges like climate change. The goal of poverty reduction will remain the guiding vision for the World Bank’s activities – but anyone wanting to fight poverty successfully has to think nowadays about climate change, pandemics and other global crises as well.”
The reforms that are to be implemented right away will have the Bank increasing its financial scope in the short term whilst still retaining its important AAA rating. To do that the World Bank will lower its equity-to-lending ratio from 20 to 19 per cent. This way it will have an additional four billion US dollars a year available for lending. Together with other measures, the World Bank’s financial scope will thus increase by a total of 50 billion US dollars over the next ten years.
Also discussed at the Spring Meeting was a new guiding vision for the World Bank. The general consensus was that the Bank’s previous goals should be kept but should also be further developed; those goals are: fighting extreme poverty and creating prosperity for all. In order to achieve these goals, however, three priority areas are to be targeted in the future: Firstly sustainability, because an intact natural environment, a stable climate and biological diversity are basic prerequisites for successful development. Secondly resilience, which means the ability of a society to deal with shocks like pandemics, climate-related damage or conflicts. This includes social protection systems that enable people to get back on their feet faster after such disasters strike. And thirdly inclusivity, because societies where there is social cohesion and gender equality develop better.
The World Bank management now has a mandate to make proposals for concrete changes to the Bank’s business model by October based on the above guidelines. Germany, along with like-minded allies, is urging for new incentives to be created for investments that benefit the whole world – such as incentives for investing in climate action, or in health systems that are better able to contain any future pandemics. No reductions or changes are to be made, however, when it comes to grants for low-income countries.