© Reuters. U.S. Treasury Secretary Janet Yellen welcomes incoming World Bank President Ajay Banga at the Treasury Department in Washington, U.S. June 1, 2023. REUTERS/Jonathan Ernst
By David Lawder
WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen on Thursday told incoming World Bank Group President Ajay Banga to “get the most out of the bank’s balance sheet” and mobilize more private capital for climate finance and global development objectives, the Treasury said.
During a meeting with Banga a day before the former Mastercard (NYSE:) CEO takes office at the World Bank, Yellen “conveyed her strong desire for Treasury to continue close collaboration” with him on the lender’s evolution to address climate change and other global challenges.
That includes continuing to implement recommendations from last year’s G20 report on capital adequacy, which argued that changes to multilateral development banks could unlock hundreds of billions of dollars in new lending.
Under Banga’s predecessor, David Malpass, the bank’s shareholders in April approved an initial round of balance sheet changes to boost lending by $50 billion over 10 years while maintaining its top-tier AAA credit rating. But Yellen has insisted that further lending reforms and other changes be made on a “rolling basis” in coming months.
Yellen said continuing to implement these reforms would “get the most out of the Bank’s balance sheet,” and mobilize more private capital “for our shared development objectives and to refine the operating model to increase the responsiveness and agility of the bank,” the Treasury said.
She also said the World Bank needed to work more closely with its sister development banks.
“Secretary Yellen stressed the need to support the poorest of the banks’ member countries as they continue to face multiple crises, including continuing global macroeconomic headwinds exacerbated by Russia’s war in Ukraine,” the Treasury added.
Banga, 63, was elected to a five-year term as World Bank president by the lender’s board of governors on May 3. Nominated by U.S. President Joe Biden, the Indian-born finance and development expert was the sole contender for the job.
The U.S., the World Bank’s largest shareholder, has traditionally chosen an American to run the World Bank, while Europe has chosen the head of the International Monetary Fund. Banga, a U.S. citizen since 2007, starts his new role on Friday.
In a parting LinkedIn post, Malpass highlighted the growth in the bank’s climate finance for developing countries during his tenure, more than doubling it to a record $32 billion last year, as well as $440 billion mobilized by the World Bank for overlapping crises starting with COVID-19, the war in Ukraine, food and energy price shocks, supply chain disruptions, and unsustainable debt.
Malpass has pushed for more debt transparency and restructuring, particularly on China’s loans to poorer countries. He said the huge buildup of government debt threatens to sap dynamism from the global economy.
“Without change, the world will likely face a long period of slow growth — and developing countries will be hit the hardest,” he added.