Some thoughts on Year 1 of the Banga regime at the World Bank
A recent talk ignores some big questions
Ajay Banga, the President of the World Bank Group, gave a “fireside chat” to the 1818 H Society on June 5.[1] There were a few questions from Society members, but mainly it was Banga talking. The chat did make a more positive impression about Banga’s leadership, at least compared to that of his 4 immediate predecessors, and we can see that the man has learned some of his lines in the first year.
I expected Banga to read the usual homily of a WB President,[2] which goes: I am turning water into wine: by (1) smiting the clumsy bureaucracy; and (2) causing miracles to lift the poor. Banga found his voice on the first, but had some lockjaw on the second, which is telling about what he has been doing in his first year and about what he has learned, or not, in those 12 months.
I can’t get that monster out of my mind [3]
The monster is the Escherian mentality of the Bank’s bureaucracy, a narrow-minded cadre which only escapes Washington to hide in the redoubts of Potomac or McLean, never listens, prefers form to content, and spends its (expensive) time in blocking bold leaders who demand change. Four recent WB Presidents believed in this convenient fairy-tale, at least at the outset of their terms.
I credit Banga for not fearing this mythical monster. He seems to recognize that change is his job, that openness and responsiveness are productive, and that hiring flunkies from McKinsey or grifters like Blair is the best way to inform staff that he lacks self-confidence. Late in this chat, Banga rightly said that “management should behave like management”. His anecdote about a project in Peru assisting abused women suggests, in his telling, that he can ask obvious questions without fear of looking foolish; this is a valuable skill. He said, correctly, that working from home must be limited in the Bank because “we cannot have a culture where people don’t talk to each other in the office”. He recognized that “your next job depends on who you suck up to”. For someone (as WB Presidents always are) who is surrounded by suck-ups, it is refreshing that Banga spoke so frankly about the Bank’s culture. It is a good thing that he has learned that.
He wandered a bit on the structure of HR in the Bank, on the new VP for HR (said to be an HR professional, on which operations staff would have mixed opinions), and on a staff transport subsidy, but his thoughts on HR were generally reasonable.
There was a good question on operational efficiency—“Are we focusing too much on project delivery and not on results ?—which got a fuzzy response, when the only possible answer is: “Yes”.
Banga noted problems with delivery: (1) projects take too long to prepare; preparation time was reportedly 19 months in the past, is now said to be 16 and management is trying for 12; (2) behavior of staff and middle management is largely for purpose of “socializing risk”, i.e., avoiding individual responsibility;[4] (3) Board still discussing individual projects not strategies[5]; Banga wants one approval for packages of projects in a given country; and (4) national approval delays (e.g., legislative approval) are a reality and are a delay outside the Bank’s control.
Now if Banga were speaking to the Board or to visiting officials, he could get away with evasive answers because such audiences know little of operations and anyway see themselves as strategic thinkers who fly high above the vulgar details. The problem with making such claims in front of experienced people is that they know better. Have Banga’s staff made a table of delays by project, sector, region, IBRD or IDA, usw ? His statement that “Procedures are a joke … even the Board knows it’s a joke” leads to the obvious question — if procedures are a joke, then why not abolish them ? Sane people know the answers—most procedures exist for good reasons: project quality, environmental and social protection, competitive returns, client responsiveness, and borrower priorities, and national capacity. Those procedures are vital to the Bank’s mandate, especially the “livable planet” part and they inevitably take time.
On other operational aspects, Banga seems to have spent too much time traveling or “responding personally to every email sent to him, within one working day”. He spoke of grouping operations without apparently knowing that grouping projects in a country strategy, seeking Board approval under simplified procedures, and doing repeater projects, have been common practice for two decades. He finally admitted that no one, not the World Bank and not other MDBs, has solved implementation delays.
At one point Banga said that “Form has overtaken substance in the institution”. There is truth in this, notably among the higher circles of the Bank. But the substance is that Bank has delivered greatly expanded programs, in real terms, across instruments, regions, sectors, and types of borrowers in the past decade, notably in response to the Global Financial Crisis and to the COVID pandemic. This delivery would have been impossible had internal rules been so binding and had experienced, capable staff not known when corners could be safely cut. Banga’s remarks on operational procedures suggests that he does not yet understand fully what the Bank does.[6]
Evaluation. I respect AB’s openness and responsiveness, but he seems not to have much of an ear for bullshit, as his remarks on the Bank’s evaluation systems indicate. He claimed there were five such systems, one reporting to him and four reporting to the Board. He seemed to propose cutting them to two, one accountable to the President and the other to the Board. The five are the Independent Evaluation Group (IEG, reporting to the Board); the IFC’s internal evaluation group (reporting through the EVP of IFC to the President to the Board); the Ombudsman’s office (reporting to the President and including the World Bank Tribunal) “facilitates the resolution of workplace issues”; the Inspection Panel, which “ … is an impartial fact-finding body, independent from the World Bank management and staff, reporting directly to the Board.”
The five entities do different things. The IEG and IFC evaluation systems are basically one, not two, and report to the Board; why would the Board allow the President of the WBG to abolish them or to move them under this authority ? The Ombudsman’s office and the Tribunal work on HR conflicts not on project impact. The Inspection Panel, again, reports to the Board in response to requests from civil society in client nations.
Banga said (about 47:15 in the video) that “I will get the ultimate independent group; it is called civil society”. He is unaware of the many client surveys (https://www.worldbank.org/en/programs/world-bank-country-opinion-surveys/context-data) that the Bank has done for decades. He clearly does not know how the Inspection Panel works. It is impossible to see what kind of efficiency gains the Bank Group can make in its evaluation procedures when the CEO does not understand what they do.
Banga has said he will listen to civil society but, as I wrote above, he seems unaware of what the Bank’s own civil society surveys have found. Beyond those surveys, there are two fresh examples of Bank management’s indifference to the criticisms of outsiders.
The Bank has just financed a development policy operation (DPO, known as budget support) to Kenya on IDA terms in an amount of US$1.2 billion. This IDA credit, whatever the Bank’s approval document may pretend about the operation’s poverty reduction and governance objectives, serves to re-finance 48% of a US$2.5 billion commercial loan to Kenya; bilaterals and the IMF are financing the other 52%. The operation appears to achieve a good return in NPV terms by saving Kenya interest on the commercial loan and by deferring repayment of IDA principal during the 10 years IDA grace period. The credit *may* allow the saved interest to be invested in carbon-saving technologies. Or, as has happened in the past, it may allow Kenya some temporary fiscal relief to assume new public borrowing that continues the country’s failure to invest in public goods, green or other. The indifference of the Fund and the Bank to the growth of Kenya’s external debt in its post-HIPC period [footnote ] suggests that is what will happen. So, one may ask Mr Banga--if your focus is less on delivering loan volume and more on project impact, what exactly is the impact of this latest Kenya DPO ?
A second example is natural gas in Bangladesh (one civil society view is at https://re-course.org/newsupdates/world-bank-support-for-fossil-gas/). Bangladesh has difficult problems in cutting GHGs. It has cheap natural gas for electricity. It is a hot humid country that is growing rapidly, with high marginal demand for cooling. The third is a high share of GHG emissions from submerged paddy and from nitrogen fertilizer. The civil society question is — why is the Bank Group (IDA and MIGA) supporting gas development in Bangladesh as a supposed transition fuel away from oil, coal, and biomass and to renewables ? Why, despite heavy WBG support to Bangladesh, is the share of renewables in the country’s electricity supply less than 1 % of the total.
New miracles
While Banga declared that he is “determined that WB will be even more important in future”, believers will be disappointed to learn that their faith in the Bank after Malpass’s defenestration has not been rewarded with miracles, though there are perhaps some good works for those who can wait a little. Policy adjustments will raise lending capacity by about US$100 billion in the next decade.[7] Banga was “cautiously optimistic” about the next IDA replenishment (the 21st, running from July 2025 through June 2028); IDA’s replenishments grew from US$50 billion in 2011-14 to US$93 billion in 2023-26 so there has been recent progress.[8] Fiscal constraints on shareholders, like the poor, shall always be with us and yet we heard nothing new about Bank management plans to do anything about them. Banga said nothing about carbon pricing or a wealth tax[9] because the US and other chairs hate those ideas—all for different reasons—but those are not reasons for failing to expand the Bank’s research, analysis, and advocacy on such instruments[10].
Some big questions
Banga declared that the job of Bank management is to: “ … simplify [and] focus on impact, not on inputs …” but continued to avoid the real questions about where to get more impact and how.
The big question is of course global heating. In response to a question about climate change and agriculture, which he really did not answer, AB claimed that 45% of WB financing in 2025 would be for climate of which would 50% would be allocated for mitigation and 50% for adaptation. While Banga is right to say that many client countries view mitigation as the West’s problem and to re-assure them that the WB is “not only the West’s bank on climate”, but he has also again been failed by his staff in making irresponsible claims about climate finance. We know that much of what is called climate finance has little to do with mitigation or with adaptation or is not additional—in other words, it is greenwashing. We know that ambitious climate finance targets have not been met (https://ferdi.fr/en/publications/climate-funds-time-to-clean-up). US$10 billion or so in new IBRD commitments in the coming decade is, to be sure, important but that money will not help the IDA countries for whom IBRD resources are too expensive.
A second unanswered question involves the conflicts that IDA borrowers face between funding adaptation and servicing their international debt. The fact is that climate financing needs cannot be met without systematic debt relief available beyond the HIPC/MDRI countries. In this regard, the Common Framework should be repudiated, today, and replaced with something more realistic and effective. We learned more about Banga’s workout regime than we did about the role of debt relief in funding climate adaptation.
A third unanswered question is the Bank’s failure in financing rapid development of renewables, including hydropower, in low-income countries. The failure here has two parts. The first is reliance on the PPP model, where the operator is private, the finance is a mix of public and private, and some of the operator’s costs are de-risked through concessional finance. This model is not working in Africa, where electricity, water supply, and flood control are seriously underfunded, and yet we see Banga talking about de-risking again and again. The second part of the Bank’s failure in renewables is that the institution for decades has allowed itself to be manipulated and intimidated by the Inspection Panel, whose goal in many situations is to block development[11] efforts through collusion with grifting NGOs. Banga even recycled the delusional remark from an earlier chat in which he confused the rigor of environmental and social safeguards for schools in Nepal with those applying to a large hydropower dam in Africa.
A fourth question is pandemic preparation, where Banga tossed off a line about “setting up a laboratory-based system for pandemic early warning”. He simply cannot be this careless.[12] The WBG is of course asked to do everything under the sun, but AB must be better briefed on complex issues where there are already global partnerships.
The future
The Bank must do better in many ways, notably in leading on a more realistic debt arrangement than the Common Framework, on genuine climate adaptation, on the green transition, and on tropical agriculture. If Ajay Banga is going to focus so much on internal issues of little relevance to the Bank’s mission, then he needs to re-think his job. I wrote previously about the mistakes that have been made in choosing the Bank’s President and I fear that Banga’s tenure is making them again.
[1]. A group of WBG retirees, named for the Bank’s Street address. Thanks to a couple of anonymous reviewers for valuable comments.
[2]. A commenter notes : “ … a great Catholic homily illustrates the Scripture, instructs on doctrine, applies it to daily life, and exhorts the faithful - all done concisely, relevantly and with authenticity”.
[3]. https://theamericanscholar.org/i-cant-get-that-monster-out-of-my-mind/
[4]. By “socializing risk” here Banga apparently meant diffusing individual responsibilities for project outcomes among the bloated cells of the matrix above the task team leaders.
[5]. At this point, AB drifted off into how women starting projects need equity not debt and how women could achieve returns with equity 20 times the returns they could achieve with debt. I wish someone could explain how this would work.
[6]. See https://johnmcintire.substack.com/p/ajay-banga-at-the-world-bank-some?r=lxiat
[7]. Making $100 billion in new IBRD commitments over 10 years would be an annual real increase of perhaps 25% over the FY 2023 level of US$38.6 billion.
[8]. IDA 16 from 2011-14 was about $50 billion. IDA 20 from FY 23-26 is about $93 billion. Applying the change in the US GDP deflator from 1/14 to 1/24 of about 1.3 gives a real increase of some 43 % (93/50*1.3)-1
[9]. https://www.climatechangenews.com/2024/06/10/no-shortage-of-public-money-to-pay-for-a-just-energy-transition/
[10]. Banga was at the G7 meeting of May 25. Annex I of the Communique (Full document — Finance Track Menu of policy options for a just transition) says nothing of significance about carbon pricing.
[11]. Ethiopia rejected Bank support to the Renaissance Dam, which has an expected capacity of more than 5 GW which would nearly double national capacity before the dam’s construction. Ethiopia rejected the Bank because it surmised, correctly, that the western NGOs, acting through the Inspection Panel, would block the dam as they had attempted to do with the Bujagali dam in Uganda.
[12]. Had the Bank not dropped the ball on epidemic preparedness in West Africa and had helped with better surveillance and laboratory capacity in Guinea, Sierra Leone, and Liberia, as a collaborative study with WHO had recommended, the effects of the 2014 Ebola epidemic might have been muted.