Mr. Banga Goes To Washington

Ajay Banga, the 63-year-old former CEO of Mastercard, went to Washington D.C. this week to continue his campaign to become the next president of the World Bank. As the Biden administration’s nominee, Banga had spent the past few weeks on a four-continent “listening tour,” which saw him clock over 39,000 miles and meetings with 37 different governments to build support for his candidacy.

Perhaps he should have stayed at home since he has emerged as the sole nominee and is likely to receive the World Bank membership’s endorsement to succeed David Malpass as president in the next few weeks. In the context of today’s messy geopolitics, how should we view Banga’s putative appointment, and what does it mean for the future of the World Bank?

As a start, the anachronistic “gentlemen’s agreement” forged decades ago between Europe and America on who should run the World Bank and IMF has held. Although Banga was born and raised in India, he is an American citizen and therefore eligible to be nominated and appointed to run the Bank.

Across the street on Washington D.C.’s 19th Street, only Europeans have ever held the reins at the IMF. There was a time when emerging markets and developing nations railed against the U.S.-Europe compact, but have consistently failed to unite and rally behind a rival candidate. The Americans and Europeans could reasonably make the argument that emerging market candidates, or at least those born in one, fill the upper echelons of multilateral economic institutions.

Besides Banga, this list includes Gita Gopinath, the IMF’s First Deputy Managing Director (India), Ngozi Okonjo-Iweala, the WTO’s Director General (Nigeria), Ilan Goldfajn, President of the Inter-American Development Bank (Brazil), and Mari Pangestu, the World Bank Managing Director who will soon report to Banga (Indonesia). This is a refreshing change compared with with even a decade ago.

The elephant in the room for Banga’s appointment is, of course, China, which had earlier indicated that it was “open to supporting” other candidates based on merit. Since none has emerged, Beijing has a choice of either going along with the likely global consensus (to appoint Banga) or to make a massive fuss about the inequities of the current system (and abstain). China also happens to be a major borrower of the World Bank, a persistent source of anger in successive U.S. administrations, and it is likely to pragmatically balance this consideration when the Executive Board meets to confirm the appointment.

While the World Bank’s faces profound challenges in realigning its mission and mandate to deal with challenges like climate change, messy geopolitics also means that Banga’s primary task will be to balance the demands of major Western shareholders (for reforming the institution), and to preserve the institution’s business model, which is heavily geared toward financing projects in emerging and developing nations.

Russia’s invasion of Ukraine has transformed geopolitics with China, India, and other emerging nations breaking away from the Washington-Europe consensus of imposing tough sanctions against Russia. How this will play out at the World Bank will be fascinating to watch. An even bigger question is whether continued U.S.-China tensions will cast a shadow over Banga’s tenure.

In his Washington D.C. public appearances, Banga has not shied away from addressing the tough issues which will soon fill his inbox. Speaking at the Centre for Global Development (CGD), for example, he noted that the Bank should continue to play a central role in coordinating global development policies. While speaking about the need for reforms, he is also eager to preserve the bank’s financing model of supporting low-income and middle-income countries (the latter list includes China, India and Indonesia).

While he recognizes the pivotal importance of climate change, Banga framed the challenge in the wider context of building economic opportunity, reducing inequality, greater digitization, and creating jobs. The World Bank under his stewardship, he declared, should not “fail” because of a lack of ambition, but should fail because of the lack of execution. This is typical private sector CEO talk, and years spent schmoozing world leaders also gives Banga a formidable advantage in shaking up the World Bank. Like the IMF, it is an essential but dysfunctional institution which urgently needs to be dragged into the harsh geopolitical and climate realities of the 21st century.