November 29, 2022

Rebooting the World Bank


Trustworthy and indepth news stories are more important now than ever.
Support our newsroom by MAKING A CONTRIBUTION HERE

The main multilateral lender to low- and middle-income countries is in dire need of reform. To become the extraordinarily powerful vehicle for sustainable development and disaster response that it can be, it must leverage its considerable financial firepower more efficiently and speed up its loan-disbursement process.

LONDON – The World Bank is on the cusp of a major transformation. Led by the United States, G20 governments have pushed it to increase support for the fight against climate change. Following recommendations by a G20-created independent panel on how to update the Bank’s financial policies to respond faster to global crises, shareholders have given it until Christmas to produce a roadmap for operational reform.

The World Bank is in dire need of a shakeup. It must leverage its considerable financial firepower more efficiently to mobilize private investors and redirect its own resources toward achieving sustainable development and other global priorities. But the reforms will be effective only if the Bank’s shareholders address the reasons why low- and middle-income countries are reluctant to work with it.

One reason, emblematic of how the Bank’s governance problems hinder its ability to respond to borrower country needs, is the slow loan approval and disbursement process. The most recent available data indicate that, on average, the World Bank takes more than two years to process a loan, from conception to the first disbursement of funds. The waiting period can be considerably longer for complex infrastructure projects.

The anemic pace of implementation is primarily the result of pressure by non-borrower government shareholders – themselves pressured by legislatures and civil-society organizations – to apply rigid, one-size-fits-all standards and procedures to all World Bank operations. For recipient countries, particularly in the developing world, this means frustrating delays.

To be sure, the Bank must maintain very high standards. Close scrutiny makes projects more effective, sustainable, and efficient. But the Bank’s onerous bureaucracy goes beyond quality control. Applying for a loan typically involves multiple in-country missions, each requiring several days of effort from teams of overworked government officials. Complex and lengthy environmental and social safeguard reviews are sometimes more stringent than those adopted by the Bank’s wealthy shareholders in their own countries. Project approval requires preparation, lengthy discussion, and approval by multiple Bank departments, including the board. And during project implementation, countries must devote valuable time to providing frequent progress reports for the Bank’s bureaucracy which are of little use to the countries themselves.

Is it any surprise, then, that a developing country in need of financing might prefer to sign a contract with, say, the Export-Import Bank of China? The project could get moving immediately, and the recipient country could avoid sometimes pushy World Bank officials. The loan might cost a bit more, but elected officials in developing countries are under huge pressure to deliver results for their populations, and speed matters.

World Bank officials are well aware of these problems and have tried to push for change. As early as 2000, the Bank established a special task force to address borrower complaints, particularly regarding safeguards and fiduciary rules. But while the Bank has taken tentative steps to simplify its process over the past two decades, including streamlined new outcome-based lending instruments and board approval for some projects based on risk, the results have been meager. The Bank barely improved its disbursement timeline between 2013 and 2017, when it stopped reporting these figures altogether – a telling sign of institutional priorities.

The main obstacle to deeper reform is the World Bank’s dysfunctional governance. A small group of non-borrower countries, led by the US, dominates decision-making. And these governments have come to view the Bank as a problem rather than the extraordinarily powerful vehicle for sustainable development that it can be. At the first sign of any reform that could be viewed as weakening standards, US congressional representatives and other G7 legislators, encouraged by civil-society groups, apply pressure to dilute or block it.

This is precisely what happened when the World Bank tried to reform its safeguard policies. Initial proposals for a modest streamlining of safeguards caused a huge outcry among civil-society groups. After four years of endless consultations and revisions, a new policy was finally approved in 2016, more out of exhaustion rather than consensus. But the new framework pleased no one and will not be fully implemented until 2025, almost 15 years after discussions began – a case study in institutional sclerosis.

The World Bank’s major shareholders must get serious about overhauling the way the institution engages with client countries. If developed countries use their voting power to prioritize domestic political-economy concerns over the Bank’s effectiveness in developing countries, everyone will be worse off.

A few critical changes could help. For starters, more widely adopting a risk-based approach to project review would significantly accelerate the World Bank’s operations. Implementing single safeguard reviews for multiple projects in the same country or sector, and making greater use of strong domestic frameworks in some borrower countries, could simplify matters. Transferring loan-approval authority to the Bank’s president or even regional vice presidents, together with a clear accountability framework, could streamline the loan approval process further.

These reforms could be piloted in middle-income countries, where legal frameworks and standards are likely more acceptable, before implementing them widely. World Bank staff, many of whom are among the most experienced development experts on the planet, should be encouraged to innovate and take calculated risks. Development is inherently complicated, and problems are inevitable. By trying in vain to avoid them, the World Bank has become overly bureaucratic, painfully slow, and less effective.

Until shareholder governments face this reality, the Bank will remain trapped in the Washington echo chamber, increasingly out of touch with the emerging and developing economies it was designed to help.

Suma Chakrabarti, a former president of the European Bank for Reconstruction and Development, is Chair of the Board of Trustees of ODI.

Chris Humphrey is a specialist in development finance at ODI and the ETH Zurich Center for Development and Cooperation.

The text has been adapted from Project Syndicate website

We can't do quality journalism without your support

Perhaps it goes without saying — but producing quality journalism isn't cheap. At a time when newsroom resources and revenue are declining, The Chronicles remains committed to "Serving Your Right To Know The Truth". Stand with us as we document Rwanda's remarkable journey for you and the future generation. Do you value our journalism? We can't do it without you. Show us with your support by CONTRIBUTING HERE.
Email your news TIPS to info@chronicles.rw or WhatsApp +250788351327.
You can also find us on Signal

76 Comments

  1. Hey There. I found your blog using msn. This is an extremely well written article. I will be sure to bookmark it and come back to read more of your useful information. Thanks for the post. I will definitely comeback.

  2. I am curious to find out what blog system you are working with? I’m experiencing some minor security problems with my latest website and I would like to find something more safe. Do you have any solutions?

  3. Thanks a bunch for sharing this with all of us you
    actually know what you’re speaking approximately!
    Bookmarked. Please additionally talk over with my site =).
    We will have a link alternate contract among us

  4. First off I want to say great blog! I had a quick question that I’d like to ask if you don’t mind. I was curious to know how you center yourself and clear your thoughts before writing. I have had a difficult time clearing my mind in getting my thoughts out. I do enjoy writing but it just seems like the first 10 to 15 minutes are generally wasted just trying to figure out how to begin. Any ideas or tips? Kudos!

  5. Hi there, I found your web site by means of Google at the same time as searching for a comparable matter, your web site got here up, it appears good. I have bookmarked it in my google bookmarks.

  6. Wow that was odd. I just wrote an really long comment but after I clicked submit my comment didn’t show up. Grrrr… well I’m not writing all that over again. Regardless, just wanted to say superb blog!

  7. This is very interesting, You are an overly professional blogger. I have joined your feed and sit up for in search of more of your fantastic post. Also, I have shared your web site in my social networks

  8. Appreciating the time and energy you put into your website and in depth information you present. It’s great to come across a blog every once in a while that isn’t the same outdated rehashed material. Excellent read! I’ve saved your site and I’m including your RSS feeds to my Google account.

  9. Attractive section of content. I just stumbled upon your website and in accession capital to assert that I acquire actually enjoyed account your blog posts.
    Anyway I’ll be subscribing to your augment and even I achievement you access consistently fast.

  10. Undeniably believe that which you stated. Your favorite justification appeared to be on the internet the simplest thing to be aware of. I say to you, I definitely get irked while people consider worries that they plainly do not know about. You managed to hit the nail upon the top as well as defined out the whole thing without having side effect , people can take a signal. Will likely be back to get more. Thanks

  11. My brother suggested I might like this web site. He was
    entirely right. This post actually made my day. You cann’t imagine simply how much time I
    had spent for this information! Thanks!

  12. Hey There. I found your blog using msn. This is an extremely well written article. I will be sure to bookmark it and come back to read more of your useful information. Thank you for the post. I will definitely comeback.

  13. My spouse and I stumbled over here different website and thought I might as well check things out. I like what I see so now i’m following you. Look forward to exploring your web page again.

  14. Hi would you mind letting me know which web host you’re using?
    I’ve loaded your blog in 3 different web browsers and I must say this blog loads a lot quicker
    then most. Can you suggest a good web hosting
    provider at a fair price? Thank you, I appreciate it!

  15. I’ll immediately grasp your rss feed as I can not find
    your email subscription hyperlink or newsletter service.
    Do you have any? Please let me recognise in order that I may subscribe.
    Thanks.

  16. Howdy, i read your blog occasionally and i own a similar one and i was just wondering if you get a lot of spam responses? If so how do you prevent it, any plugin or anything you can advise? I get so much lately it’s driving me mad so any assistance is very much appreciated.

  17. Everything is very open with a really clear description of the challenges. It was really informative. Your site is very helpful. Thank you for sharing!

  18. Thank you for another fantastic article. Where else may just anyone get that kind of information in such a perfect means of writing? I have a presentation next week, and I am at the look for such information.

  19. Do you mind if I quote a couple of your posts as long as I provide credit and sources back to your site? My blog site is in the very same area of interest as yours and my visitors would genuinely benefit from a lot of the information you present here. Please let me know if this okay with you. Cheers!

  20. Mү spߋuse and I stumbled over here coming from a diffesrent page and thought І may as
    weⅼl check things out. I like whаt I see so now i’m following you.
    Look forᴡarⅾ to checking out your web page yet аgaіn.

    Нere is my webpage :: Slot Dewa99

  21. Hi there! Do yⲟu knoiw if they make any pⅼugins tо safegᥙаrd against hackers?

    I’m kinda paranoid about losing everything I’ve worked hard on. Any suggestions?

    My site: Rans88

  22. Hey there would you mind stating which blog platform you’re working with? I’m looking to start my own blog in the near future but I’m having a tough time selecting between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your design and style seems different then most blogs and I’m looking for something completely unique. P.S My apologies for getting off-topic but I had to ask!

Leave a Reply

Your email address will not be published. Required fields are marked *