From dialogue to action: Key lessons from the Consultations on the World Bank Reform Process

The World Bank’s current reform efforts are approaching a critical point during the Annual Meetings in Marrakech, Morocco, from October 9 to 15, 2023. The Bank should use this moment to adopt meaningful changes that enable it to tackle the twin challenges of global development and climate change and reflect voices of stakeholders from around the world. The recent consultations conducted by the World Bank, including the regional ones conducted in Africa in July, represent a significant step forward. But they also spotlight crucial issues that demand an unwavering attention by all stakeholders.

During these consultations, the World Bank gathered input from a wide range of stakeholders from the Global South, including civil society, academia, foundations, think tanks, the private sector, and other development partners. It is imperative for the upcoming Annual Meetings to ensure the integration of critical insights derived from these consultations into the final reform document.

The report of the World Bank‘s Development Committee (DC) unveiled during the Spring Meetings in April represents a substantial improvement over the previous Evolution Roadmap and had already addressed some of the serious concerns voiced during the consultations. Notably, the DC’s report unequivocally underscores that the Bank’s enhanced mission must be accompanied by an increase in its financial capacity,  although the concrete measures proposed still fall far short of the substantial firepower required for the expanded mission. Moreover, the DC’s report also reiterates that addressing the challenges of climate change should not come at the expense of poverty reduction. Additionally, the previous shift of focus from low-income countries (LICs) toward middle-income countries (MICs), a notable feature of the Evolution Roadmap, has significantly diminished in the DC’s report. The World Bank’s proposed mission “to end extreme poverty and boost shared prosperity by fostering sustainable, resilient, and inclusive development” also puts reducing inequality and fostering inclusion –two key demands from the consultations –at its core.

It is imperative to underscore that the effective execution of these commitments is inextricably linked to the Bank’s capacity to augment its lending prowess. Therefore, shareholders must promptly undertake resolute measures to bolster the Bank’s financial strength. In this context, the announcement by Chancellor Olaf Scholz that his government would invest in hybrid capital is an important step in the right direction. This investment can unlock up to $2 billion in additional lending capacity. Looking ahead, this has the potential to significantly boost the World Bank’s lending capacity, particularly if the German government engages in diplomatic efforts to persuade other stakeholders to do the same. In addition to the aforementioned concerns, these consultations have highlighted crucial issues that merit the World Bank’s focus at the upcoming Annual Meetings, and by gauging their frequency of mention, we have pinpointed three pivotal areas that should be integrated into a revised World Bank reform document.

1. Fighting Corruption and Strengthening Governance: The persistent challenges of poor governance and widespread corruption in LICs and MICs continue to hinder progress towards the Sustainable Development Goals (SDGs). Participants in the Bank’s consultations have rightly called upon the institution to prioritise combating corruption as a cross-cutting issue in all interactions with national governments. Some suggest making participation in initiatives like the Extractive Industries Transparency Initiative (EITI) and the Open Government Partnership (OGP) mandatory for borrowing countries. As the World Bank seeks to increase its financing capacity, it should advocate for greater transparency in recipient countries to ensure that increased funding does not lead to increased corruption. Linking lending criteria to transparency and striving to be a model of procurement and procedural transparency are crucial steps forward.
2. Strengthening Engagement with Civil Society Organisations (CSOs): the World Bank should engage and support CSOs as critical advocates for transparency and accountability. While acknowledging that CSOs were well-represented in the consultations, there is a concern that the institution may be disengaging them. With governments as the primary clients of the WBG, the involvement of CSOs is crucial to ensuring the transparency and impact of projects.
3. Focusing on Small and Medium Enterprises (SMEs): Participants generally welcomed the World Bank’s enhanced focus on leveraging private capital. However, it is vital to ensure that SMEs, which drive economic growth and job creation in LICs and MICs, are not overlooked in this new orientation. The Bank must actively address the concerns raised by some participants who fear that SMEs may lose out to larger corporations.

In sum, the World Bank’s ongoing reform process is commendable for providing a platform for multiple voices from around the world, including from African countries. The concerns from around the world must be met with a strong commitment to proactively combat corruption, improve governance, engage CSOs and support SMEs. In addition, the Bank’s financing capacity needs to be strengthened through capital increases from shareholders and through other bold changes that better leverage the Bank’s balance sheet to unlock additional financial resources. The German government can play a key role by trying to convince other stakeholders to join in investing in hybrid capital as a way to mobilise additional resources for sustainable development.