The World Bank ratified the nomination of Ajay Banga as its next head, giving the Biden administration a chance to evolve the anti-poverty lender toward a greater focus on climate change.
The former Mastercard Inc. chief executive was tapped by President Joe Biden in February after outgoing president David Malpass announced plans to step down almost a year early.
Banga’s election was largely a formality because he was unopposed. The institution’s top job has always gone to a US candidate. His five-year term starts June 2, the Washington-based lender said in a statement Wednesday.
While Banga built a long career in the private sector, especially in finance and banking, he’s highlighted the perspective he could bring to the job from his upbringing and education in India, as well as his commitment to climate science and his belief that poverty and environmental issues are intertwined.
The World Bank opened the nomination period in late February and said at the time that it expected the process to wrap up by early May.
Banga, 63, in April undertook a global tour to creditor and borrower nations to build support for his nomination, with stops in China, Kenya and Ivory Coast, as well as the UK, Belgium, Panama and his native India.
He is taking over at a pivotal time for the anti-poverty lender, which gives out about $100 billion annually. The US is among nations pushing reforms of multilateral development banks to unlock more climate financing for the developing world.
Treasury Secretary Janet Yellen has said the world’s oldest and largest development bank must evolve from its traditional focus on country-specific lending to address global challenges like fighting climate change, and to more aggressively extend its balance sheet.
While such a funding move is expected to unlock billions of dollars in additional funds, the US has urged care to protect the lender’s AAA credit rating, which allows it to borrow and lend cheaply to poorer countries. Banga earlier this month said that assessment needs to be protected, and called on private capital to help expand the bank’s effectiveness.
In Wednesday’s statement, the lender’s board said it looks forward to working with Banga on its evolution process.
The new World Bank leader “understands that the challenges we face – from combating climate change, pandemics, and fragility to eliminating extreme poverty and promoting shared prosperity – are deeply intertwined,” Yellen said in a separate statement.
Proposed changes to how the bank operates would boost lending by $50 billion over the next decade, sharpen its mission and align its operations with US goals, Biden said in a statement following the news.
“Our ambitious goals will not be met overnight, and we remain committed to a staged adoption of reforms over the course of the year to build on the vision we have laid out,” Biden said. Banga “will play a critical role in that work, including its development and implementation in the coming years.”
Malpass and the head of the International Monetary Fund, Kristalina Georgieva, have also been leading a push to get China, the biggest creditor to emerging economies, to participate in debt restructuring for distressed nations, alongside traditional western creditors from the Paris Club like the US.
China at last month’s Spring Meetings of the Bretton Woods institutions softened its insistence that multilateral lenders like the World Bank take haircuts, or losses, on their debt along with all other creditors. That came amid an apparent concession by the lender to boost ultra-low interest loans and grants to countries in debt distress.
Biden’s choice of Banga, who has been an advocate in his private-sector career of cashless transactions and finding ways to serve the unbanked, had been met with criticism among advocates as being too associated with corporate interests.
Since his nomination, Banga has declared himself a “big believer” in the scientific evidence that burning fossil fuels contributes to climate change, seeking to address criticism about the lender’s commitment to the issue under its outgoing chief.
His comments also contrast with a public relations flub by Malpass last year, when he came under fire for appearing to dodge questions on whether he believed that climate change is driven by man-made greenhouse gas emissions.
By Eric Martin / Bloomberg