A top White House official has called on China to take on a bigger role in the World Bank, adding that the seven-decade-old multilateral development bank was not built to address multiple and overlapping global crises.
US deputy national security adviser Daleep Singh said he believed the bank’s business model was not well-suited to catalysing global change.
“We’re going to need China in particular, but also the private sector, to step up and take burden sharing seriously through the common framework,” he said, referring to the G20 framework agreed with the Paris Club of official creditors.
Singh said the bank needed to have less of a focus on maintaining a AAA credit rating.
“I think the bank has made a fetish out of its triple-A rating over the course of many years,” Singh said, citing studies that showed a small downgrade in the bank’s credit rating could triple its lending capacity or more.
Shifting its stance would allow the bank to more risk appetite and become more of a “first mover” in terms of investments in the developing world, Singh said.
The bank could take on “first loss positions” that could potentially motivate private sector investors to come in and expand the pool of resources available for climate finance or health security into the trillions of dollars needed.
“That’s what’s going to be needed to hit the Paris goals when it comes to climate, both on emissions reduction and adaptation,” Singh said.
He said the World Bank also needed to “get a lot louder” about the need for debt restructuring for low-income countries, given that 60% are in or near debt distress.
Yellen Calls for Reforms
Separately, US Treasury secretary Janet Yellen said both the International Monetary Fund (IMF) and the World Bank needed deep reforms.
The IMF was intended to help individual countries deal with isolated crises, while the World Bank was created to finance development projects in countries that lacked access to capital markets.
“We face challenges that will now require investment on a scale that an international institution can’t manage on its own, like climate change,” Yellen said. “The investments for climate change will add up to just trillions and trillions of dollars.”
She said she could not say what reforms are needed to scale up the institutions, but she added that they needed to be able to harness large pools of private capital.
The World Bank’s lending totalled $99 billion in fiscal 2021.
- Reuters, with additional editing by George Russell