Oon February 23rd, a week after David Malpass announced his stepping down as World Bank president and just hours after the bank said the search for a successor would be months, “open, performance-based and transparent,” everyone knew who would win. Ajay Banga, a former Mastercard boss, has been named leader of the lenders by the White House. As a naturalized American, who he says was “Made in India,” and a businessman in the private sector, Mr. Banga represents a break with tradition.
However, emerging markets did not take his nomination as a win. The White House has chosen every President of the World Bank since it struck a gentlemen’s agreement with Europe to make the choice IMF‘s boss, in 1944. America also holds an outsized share of votes at the bank. That made sense after World War II. Now countries from China to Panama want their growing presence in the global economy to be reflected in their institutions.
Mr Banga’s first task will be to tackle power struggles. The same tensions culminate in disputes over the role of the bank. America and Europe want it to lend more with looser restrictions to ease the burden of rising interest rates, climate change and less Chinese lending to poor countries. But some emerging markets are pushing back, saying such a move would jeopardize the organization’s ultra-security aaa Credit rating. Without additional capital, the bank has gaping gaps in its coverage. Its officials have held back on rebuilding Ukraine, trying to pump as much as regional facilities into green infrastructure.
Another battle revolves around debt relief, which China has stalled by insisting the World Bank write down its loans. Mr. Malpass has so far resisted that this would affect the bank’s lending ability. A more antagonistic China reduces the likelihood that American politicians will be willing to give Beijing more votes any time soon.
Some doubt Mr. Banga (who is on the board of Exor, which owns an interest in Exor The economist)’s parent company is able to handle the bureaucratic maneuvers needed to break the impasse. He will be the first appointee without full-time development or government experience since James Wolfensohn, a banker and lawyer, in 1995. But Mr Banga’s career could be an asset. After more than a decade on Wall Street, he led the rise of Mastercard from a $20 billion credit card company in 2009 to a $300 billion payments platform. He is well positioned to lead work on digital payments, a priority for the bank. And he has a reputation for turning unwieldy organizations into fancier outfits.
Mr Banga could also help the bank finally adopt a green agenda. In September, Mr Malpass dodged a question about fossil fuels and global warming, saying he was “not a scientist”. In January, western countries rejected the bank’s climate plan as not ambitious enough. At Mastercard, on the other hand, Mr. Banga wrote super green blogs. The hope is that he will use his Wall Street savvy to get companies to pour money into green tech and infrastructure.
America’s ideal World Bank is a well-oiled machine with a sustained bias, much like the Mastercard Mr. Banga left behind. Before repeating the ploy, the new president must first end the routine power struggles by winning over emerging markets. To do this, he must make her forget the unjust circumstances of his selection. ■
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