Ajay Banga, a former Mastercard chief executive, has been confirmed by the World Bank’s executive directors to take the helm as the lender faces rising expectations for its support to countries in need, including in confronting climate challenges.
Banga, President Joe Biden’s pick for the role, will begin his five-year term on June 2.
His predecessor David Malpass, a Trump-era nominee, is stepping down nearly a year ahead of schedule. Banga will inherit a full inbox amid multiple global crises and as the bank undergoes a reform process aimed at increasing lending.
“The Board looks forward to working with Mr. Banga on the World Bank Group Evolution process,” the executive directors said in a statement, adding that they want to tackle “the toughest development challenges facing developing countries.”
Banga, an Indian-born U.S. citizen, has been widely praised for his management skills at Mastercard, as well as his establishment of financial inclusion programs at the firm. He’s made clear he is entering the World Bank role with a strong focus on climate and driving private-sector investment into development.
Banga will have to drive reforms at the bank to see it increase its lending and become more agile to respond to the rising number of intractable global crises, including the fallout from Russia’s invasion of Ukraine.
“Getting the evolution of the World Bank right is absolutely critical to meeting the moment,” a senior U.S. administration official told reporters Wednesday. “Ajay has the track record and the know-how to rise to the occasion,” the official added.
Banga, 63, will face calls for more climate spending at the bank, whose main wing has more than $230 billion in loans to its client countries. But he will also confront the fact that extreme poverty is rising for the first time in decades, and dozens of the bank’s client countries are facing severe debt challenges that hamper their ability to invest in health, education, and job creation.
The incoming chief has made clear he has no “magic wand” as he seeks to temper expectations.
“Our ambitious goals will not be met overnight, and we remain committed to a staged adoption of reforms over the course of the year to build on the vision we have laid out,” U.S. Treasury Secretary Janet Yellen said in welcoming the board’s decision.
Banga will also face a somewhat divided board amid a heated debate about how to shape the bank’s mandate for the modern era. Some countries want its lending to remain focused on poverty, while others — notably some of the higher-income nations — argue that progress on reducing emissions and fighting poverty inherently go hand-in-hand.
And Banga will face pressure to help debt-distressed countries get relief from China, a major creditor.
There was a notable word absent from the board statement that reflects some of the global fragmentation with which Banga will have to cope.
Whereas Malpass was “unanimously selected” in 2019, Banga was merely “selected.” There had been signs Russia might block consensus, as it has done at international fora since the invasion of its neighbor in February last year.
“The financing needs of lower-income countries will be larger going forward,” said Amanda Glassman, a keen bank watcher at the Center for Global Development, noting all the shocks in the world.
“I am watching for Banga to deliver leadership and shareholder consensus on the addition of a more ambitious climate goal to the Bank’s mandate whilst growing the finance available to the lagging development agenda,” she said.
On the issue of more finance, Homi Kharas, a former senior banker now at the Brookings Institution, supports a capital increase but says Banga will first have to show “demonstrated proof” that he is upgrading the bank for the modern era.
The new chief “commands real respect” which will help him cajole the board into changes, Kharas said, but warned: “If the bank wants to be an influential player, it has to step up in terms of its size.”
Banga, who went to eight countries and met with about three dozen governments in recent months, will begin his formal onboarding next week, according to sources at the bank.
Experts say they expect Banga to take time to get to know the institution and its staff from the inside before he makes any big moves.