Finance

U.S. Congress report assesses World Bank’s proposed reforms

Friday, 12 May 2023 19:10
U.S. Congress report assesses World Bank’s proposed reforms

(Ecofin Agency) - The points discussed are crucial for the proposed reform of the World Bank, but they only focus on U.S. priorities. Yet the World Bank's new role in Africa and its collaboration with other regional institutions deserve attention.

A memo from the U.S. Congress highlighted "key" points to inform U.S. lawmakers’ debate on the World Bank’s proposed reforms. One of the key points discussed that concerns Africa is the overall reform agenda, particularly whether the multilateral institution should continue focusing on regional and national interventions or shift its focus on global crises that are multiplying.    

Another point highlighted is the reform of the metrics and methodologies to rank business environments.  In 2021, the Doing Business report was discontinued because some senior World Bank officials were suspected of “improperly influencing” the report to benefit some countries. This scandal lowered trust in the report, which was considered a benchmark of the risk environment in African countries.  

The memo also questions the role of the World Bank in financing developing economies, when there is now a vibrant capital market that can provide needed financing. It also raises the issue of China's eligibility for certain World Bank projects, as well as that of Russia, the World Bank’s eighth-largest shareholder strongly criticized for its invasion of Ukraine.

 President Joseph Biden's administration already seems to have a clear idea of what reforms should be carried out. On several occasions, U.S. Treasury Secretary Janet Yellen has outlined her vision of the reforms. One such occasion was a meeting at the International Center for Strategic Studies (CSIS), a Washington-based think tank, earlier this year. A more detailed presentation of that vision was given at the development conference of October 6, 2022

This vision was almost entirely reflected in the initial reform proposal, published by the World Bank in December 2022. The proposal discusses points like changing the World Bank's mission, its financing capabilities, and its operating model. It does not however discuss new issues like cooperation with regional and multilateral development banks, such as the African or Asian development banks, which possibly have a better understanding of their operational regions and the issues affecting their member countries.  

Also, most of the points discussed highlight U.S. priorities. It will be difficult to carry out a reform not supported by the U.S. As the largest World Bank shareholder,  the country holds key positions in the multilateral institution’s strategic departments. Meanwhile, Africa is the largest World Bank operating ground, with a $114 billion active portfolio (according to the institution’s 2022 annual report). 

The U.S. Congress will have to be convinced to allocate public funds to an initiative that is now focused solely on other regions’ priorities. But, Africa, which will be mainly impacted by the reforms, is yet to make such calls. In early May, at a meeting in Addis-Ababa, Ethiopia, some African finance Ministers called for a reform of multilateral development institutions. They notably focused on increased access to resources, less complex processes, and more concessional financing instruments. Not many calls have been issued for reforms concerning the priorities of development assistance, whose rules may continue to be dictated by Washington and its allies.  



 
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ECOFIN AGENCY offers a selection of articles translated from AGENCE ECOFIN. Founded in 2011, Agence Ecofin is a leader in Francophone Pan-African economic news, particularly in West and Central Africa. The agency publishes daily news on nine African economic sectors: Public Management, Finance, ICT, Agribusiness, Energy, Mining, Transport & Logistics, Communication, and Training.

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