US Treasury secretary Janet Yellen has stepped up pressure on the leadership of the World Bank by urging it to “quickly” put in place reforms to free up more money to address climate change among other global challenges.
The US is the largest shareholder in the international finance institution that provides funding for developing countries and has pushed for an overhaul along with several other major shareholders including Germany.
Speaking in Washington on Thursday, less than a fortnight after a trip to three African countries, Yellen focused on her concerns about the bank. It should “expand its vision to include addressing global challenges” and help lower costs for countries needing funds to do so, as well as to engage in “stronger” mobilisation of private finance, she said.
Yellen also noted that including global issues such as climate change or pandemic preparedness should not mean shifting the bank away from its existing goal of reducing poverty.
“The world has changed, and we need these vital institutions to change along with it,” she said. “In today’s world, sustained progress on poverty alleviation and economic development is simply not possible without addressing the global challenges that face us all.”
The World Bank’s leadership has come under fire for lagging behind in its efforts to help tackle climate change. It was exacerbated when the Donald Trump-appointed president David Malpass refused to say whether he believed in human-caused climate change at a conference last September, despite repeated questioning. He later said he had been misunderstood.
Reform of the multilateral development banks has risen on the global policy agenda as wealthy countries are confronted by increasingly urgent questions about who pays for the catastrophic impact of hurricanes, floods and wildfires.
Smaller and less-wealthy nations have pressed to build a UN coalition to secure funds that would help them tackle the consequences of global warming without increasing their debt burdens to crippling levels.
Mia Mottley, the prime minister of Barbados, has put forward several proposals for action at the World Bank and IMF, including the redistribution of $100bn in special drawing rights and the new issuance of long-term, low-interest debt instruments to help finance clean energy projects.
The US has led calls from developed countries for reform of the World Bank and other financing institutions. Last year, Yellen asked the bank to develop an “evolution road map” to show how it would incorporate climate and pandemic preparedness into its operating models.
Yellen on Thursday increased the tempo by saying the US expected “to see ideas translated into action” over “the next few months”. She called on it make “straightforward” decisions first and to begin putting in place elements of its road map by the time of the spring meetings held by the financial institutions.
She also urged the bank to begin “quickly” stretching its existing financial resources by putting into practice some of the recommendations made by a report commissioned by G20 last year.
The report outlined steps for the World Bank and other multilateral development banks to boost their spending, including adjusting the amount of capital they hold against loans, securitising private sector portfolios and piloting new types of financial instruments.
Yellen on Thursday reiterated her previous suggestions that development banks broadly should make greater use of concessional finance, including grants, to fund investments where the benefits are shared globally.
This could include finance to decommission coal plants and protect displaced workers during a clean energy transition, she said.
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