Reform process Positive mid-term review at World Bank Annual Meeting: reforms have made bank significantly better and bigger
In addition, a further reduction in the ratio of equity to loans will increase lending capacity considerably for the coming years. In combination with other measures introduced over the past year and a half, this will enable the Bank to loan an additional 150 million US dollars over the next 10 years. This represents an increase of around 50 per cent in financing for sustainable development in middle-income countries.
Parliamentary State Secretary at the German Development Ministry Niels Annen represented Germany at the meeting.
Niels Annen said: “Eighty years on from the Bretton Woods Agreement, the World Bank is better placed than ever to fulfil its key role in tackling the major global challenges of our time. The commitment to reform demonstrated by World Bank President Ajay Banga and the Bank’s shareholders over the last two years has produced remarkable results. When we first initiated the reform two years ago, only the greatest optimists among us could have imagined that we would be able to achieve so much in such a short space of time. With its new vision – ‘A world free of poverty on a livable planet (External link)’ – the World Bank not only changed its course but also succeeded in increasing its lending capacity by 150 billion US dollars within a very short period.”
The fundamental reform of the World Bank was initiated by Federal Development Minister Svenja Schulze as Germany’s World Bank Governor, US Secretary of the Treasury Janet Yellen and other stakeholders in autumn 2022. Just one year later, at its Annual Meeting in Marrakech in 2023, the World Bank agreed on a new vision: “A world free of poverty on a livable planet.” This went hand in hand with a distinct change of direction: ending poverty and preserving vital natural resources are now fundamentally linked. The newly published Scorecard (External link) serves as a measure of the World Bank’s progress here. The Scorecard lists 22 indicators covering all areas of sustainable development, including: How many people are being included in social protection programmes? What are the developments in terms of greenhouse gas emissions? How many hectares of ecosystem areas have been protected or are being managed sustainably? How many people are benefiting from improved gender equality?
The World Bank is putting a particular emphasis on improving gender equality. This was the focus of this year’s autumn meeting, and the World Bank’s new Gender Strategy 2024-30 (External link) and the newly agree implementation plan systematically pursue goals such as ending gender-based violence, improving women’s economic opportunities and increasing women’s involvement in decision-making processes. Gender equality is not only a question of rights and justice; it is also key to achieving sustainable development.
In addition to a “better” Bank, developing countries in particular also called for a “bigger” bank at an early stage in the reform process. Germany led the way here and became the first country to commit hybrid capital in the amount of 305 million euros. The corresponding agreements were recently signed by World Bank President Banga and Development Minister Schulze at the Hamburg Sustainability Conference. Hybrid capital has properties of both equity and debt capital. Like equity capital it raises the Bank’s equity base, but like debt capital it does not affect voting rights within the Bank. Numerous other donors are following suit with hybrid capital or guarantee commitments. This will enable the World Bank to leverage an additional amount of up to 70 billion US dollars over the next 10 years for combating climate change and pandemics and tackling other global challenges. The World Bank also improved the ratio of equity to loans; after this was lowered from 20 to 19 per cent, President Banga was able to announce a further reduction to 18 per cent. This will enable around 80 billion US dollars of additional loans to be issued. Within the space of just two years, the World Bank has thus succeeded in increasing its lending capacity for the coming years by up to 150 billion US dollars by adjusting its capital adequacy and through commitments by many of its shareholders.
Niels Annen said: “The World Bank today is bigger and better than ever, and has found the right answer to the G20’s call for it to play a greater role in financing a sustainable transformation. What we need now is to continue pursuing the reform process wholeheartedly. The ambition shown in Washington should set the tone for the international community’s negotiations at the upcoming World Climate Summit in Baku, too.”