Committee for the Abolition of Illegitimate Debt

The speed with which the US nominated Wall Street veteran Ajay Banga as their candidate for the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

Group’s (WBG) President came as a surprise to many in civil society. Malpass’ resignation, announced just a week before, was a new opportunity to rethink the role of the institution to address the multiple challenges that countries in the global south are facing. Instead, hope turned to incredulity and anger - as the US government announced that the vice-chair of a US private equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. group, and former chief executive of MasterCard, was their choice to lead an international institution with a mandate to promote sustainable development and eradicate poverty.

It is a widely held view that the WBG is in urgent need of a rethink. Following the publication of two damning reports in 2021, revealing serious ethical improprieties, conflicts of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. in the Bank’s Advisory Services and data manipulation in the development of its flagship Doing Business Report, more than 100 civil society organisations and academics from around the world called for the overhaul of the institution. Then in September 2022, environmental organisations demanded that Malpass step down as President after his non-committal response when questioned about whether he believed in human-driven climate change. Yet he remained. And he remained defending until the end the assertion that it is more important to retain the AAA rating of the World Bank than to open the door to debt cancellation, not even for a temporary suspension of debt payments.

On the other side of the spectrum, the Bank’s shareholders have also stepped up their call for reform. With the Bridgetown initiative - presided over by Barbados’ Prime Minister Mia Mottley - leading the vanguard, and the G20 following with their particular appeal for more firepower, the World Bank and other multilateral banks are under pressure to be bolder and step up concessional lending.

The next leader of the World Bank must break with the past and have a vision for the future. The President must understand that the Bank has at best been floundering, and at worst completely failing to achieve its objectives - and it must change. It must play its part in implementing rather than undermining the global agenda on development, inequality, climate change, and social justice. It needs to earn the trust of the communities and countries where the World Bank does - or should - provide finance. Human rights must be at the centre of its policy and democracy and inclusiveness at the heart of its governance model. And it is high time that a woman - a feminist - an heterodox economist - a person truly representing the global south, is given the job.

Instead with Banga it will be more of the same. And doubly so. US President Biden noted his ‘decades of experience building global companies and public-private partnerships’ as valued credentials when announcing Banga’s nomination. Yet there is very little documented evidence of global companies of the likes of Citigroup, Dow, Pepsico or Nestle that Banga has earned his stripes with - or public private partnerships in general - creating shared prosperity in a sustainable way. On the contrary: both Exor, the investment holding company of which he is the Board Chair and Temasek, Singapore’s state owned investment fund Investment fund
Investment funds Private equity investment funds (sometimes called ’mutual funds’ seek to invest in companies according to certain criteria; of which they most often are specialized: capital-risk, capital development funds, leveraged buy-out (LBO), which reflect the different levels of the company’s maturity. where he is a director, invest in fossil fuel projects. He cashed in on share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. sales after Trump-era tax cuts allowed MasterCard to inflate its share price through buybacks. Biden’s choice for the World Bank leadership sends a clear message: the future they picture is private. Banga is amongst the believers that climate action will happen through private finance and private investment. We strongly disagree.

Banga’s rapid nomination also continues the archaic and deeply neocolonial ‘gentlemen’s agreement’ whereby the US gets to choose the head of the World Bank and Europe, the head of the IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org . Having crafted an ‘elegant solution’ to the diversity conundrum - as India’s IMF Executive Director described the nomination of Indian-born Banga - it is not expected to receive great opposition from other parts of the world.

Irrespective of this the US’ rapid nomination of their candidate demonstrates their intent to maintain an antiquated arrangement. This could not be further away from the good governance principles of transparency and efficiency that the World Bank and its shareholders preach, but do not practice.

Well into the 21^st century, it is time for responsive, inclusive, democratic and accountable governance of the World Bank, starting with the selection of its President in an open and transparent process. Right now, this feels more Empire than meritocracy.