FINANCIAL WORLD

Can Trump reform the World Bank?

In Summary

• His nominee declared he’ll focus on poverty alleviation and shared prosperity. Only time will tell.

World Bank Group President David Malpass and IMF Managing Director Christine Lagarde at the IMF and World Bank's 2019 Annual Spring Meetings, in Washington
World Bank Group President David Malpass and IMF Managing Director Christine Lagarde at the IMF and World Bank's 2019 Annual Spring Meetings, in Washington

David Malpass is the new World Bank President. Malpass was nominated by President Donald Trump and on April 9 he was unanimously selected by all 25 Executive Directors of the World Bank.

Malpass was until his posting to the World Bank the US Undersecretary of the Treasury for International Affairs under the Trump administration. Hence, Melpass is not a stranger to international finance and development. Last year Malpass was part of negotiations on a package of lending reforms at the World Bank.

Malpass is viewed as a Trump loyalist. He served as close adviser to the Trump campaign in 2016. Some regard Malpass’s appointment as a reward. The new World Bank boss has been critical of the institution he now leads. Malpass has described the World Bank along with IMF as too big, sprawling and ineffective.

Malpass has suggested that the World Bank should not lend to middle-income countries such as China, which he considers financially strong. He has charged that multilateralism has gone too far to the point that it is hurting US and global growth. Clearly, that is not a view you would associate with an individual who sits at the pinnacle of globalism, the World Bank.

Malpass understands that most of the money the World Bank gives to developing countries is spent on first-class air tickets for bank officials and ludicrous consultancy fees for technical experts. What developing countries get is rising debt

When Trump announced his nomination at the White House in February, he said Malpass was best suited to serve American interests and defend American values. In his remarks following his nomination, Malpass announced that he would focus on women’s economic empowerment and that he would continue working with Ivanka Trump on her global development and prosperity initiative for women.

One of the biggest worries about the new World Bank boss is that he will be less interested in the bank's role in investing in combating climate change and investing in services such as health for refuges. Many fear that his framing of the role and vision of the World Bank is too narrow and motivated by Trump’s Americanism.

So it is understandable that Malpass’s early days at the World Bank will be viewed with suspicion. But last year, to his credit, Malpass supported a plan for World Bank shareholders to inject $13 billion into the bank and to focus more on poorer countries. He sounded pretty comfortable laying out his vision and taking questions from the press during the 2019 Spring Meetings of the IMF and the World Bank.

At a press interview during the meetings, Malpass declared that his focus will be poverty alleviation and shared prosperity. He also said he will work more closely with World Bank country offices to ensure the bank support is aligned to national priorities.

Malpass understands that most of the money the World Bank gives to developing countries is spent on first-class air tickets for bank officials and ludicrous consultancy fees for technical experts. What developing countries get is rising debt.

Can Malpass bring about the much-needed reform at the World Bank? Only time will tell.