What Africa needs from the World Bank under Ajay Banga

It’s not business as usual. The world needs change agents like never before. And leadership is the much-needed currency to drive that change.

It is therefore not surprising that many are looking to Ajay Banga to bring additional global leadership to help find solutions to the polycrisis faced by nations across the world.

Bringing development back

Overlapping crises, one triggering another – from climate to pandemics to debts crisis, food crisis and energy poverty – risk derailing the developing economies from their development paths, further exposing them to external shocks and slowing their long-term poverty alleviation efforts.

The World Bank is the engine room of global finance, and its wide reach, financial firepower, and expertise uniquely position it to be a major driver of global progress. A change of leadership should serve to re-energise this mission through a series of reforms.

The World Bank, like other multilateral development banks, needs to reshape its role by supporting low- and middle-income countries to respond to challenges related to their socio-economic development and in the process provide them with a much-needed boost in capabilities to respond to challenges such as climate change.

To date, Africa remains the most energy-poor region in the world. The African Development Bank estimates that the funding gap for electrifying Africa will be $100bn per year from 2020 to 2040. The continent currently attracts a mere 2% of global investments in green infrastructure. Powering Africa through large-scale investments in clean energy infrastructure will therefore not only help meet the challenge of energy access and powering African economies, including their industries, but also help the continent leapfrog rather than transition.

The World Bank can play an important role in unlocking this much-needed financing. And that will require reforms in its due diligence, in the speed with which it disburses resources once agreements are reached, and in decisions on what infrastructure to fund thus moving away from external-trade-oriented infrastructure to infrastructure that can energise African economies and promote energy access.

A collaborative international financial architecture

The incoming leadership of the World Bank will need to better mobilise the muscle power that the Bank has in terms of resources and influence. It can indeed play a transformational role. But it will need to also recognise the important role played by regional development banks. They have played a key role in responding to the needs of their borrowers.

Banga should strive to make it a more collaborative development finance institution open to partnering with like-minded regional DFIs, by leveraging or co-financing, in tackling modern-day challenges and accelerating the growth of green infrastructure across the global south. Banga’s visit to the African Development Bank as one of his first interactions as a nominee is certainly a positive first step.

Responding to the climate challenge

Debate on the role of the World Bank in climate finance has been propelled to the forefront. Africa is one of the regions in the world most affected by climate change. That the continent will need investments in areas such as green infrastructure and resilient agriculture, among others, is beyond doubt.

The role of the World Bank in this matter will need to be discussed, given widespread concerns in Africa about climate becoming the central preoccupation of the Bank. Some African negotiators have expressed concerns that discussions on the reforms of the World Bank and other international financial institutions could be used as an excuse by the global North to shirk their responsibility of delivering adaptation finance commitments and compensation for the global environmental damage they have caused.

Others, such as South Africa’s finance minister, Enoch Godongwana, have expressed the desire for the Bank to keep its poverty alleviation focus and not allow a climate mandate to overshadow other critical social areas like education and health.

To be clear, the World Bank already plays a role in financing climate action. In 2022, the World Bank Group delivered $31.7bn in climate finance with funding channelled primarily through the IBRD and IDA. Although greater transparency on the additionality of the Bank finance and its distinction from funds flowing through it from climate funds like the Green Climate Fund (GCF) would be useful, the Bank can play a more strategic role by focusing on leveraging resources from these climate-focused funds to make them more catalytic.

It is indeed perhaps by focusing the reforms on the Bank’s ability to partner and leverage funding that could help unlock further climate financing, working in tandem with funds specialising in climate finance.

The message coming out of Africa is in this sense clear: reforms of the World Bank should not focus on supercharging its mandate and turning it into a “superbank”. Rather the focus is on making sure that the Bank’s funding is accessible, appropriately structured and delivered in a timely manner.

The success of Banga as World Bank’s next president rests on many factors, but none is perhaps more important than how he relates to developing economies and how he handles climate.

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