The World Bank reaches a Crossroads

The World Bank has a new president to guide it through taxing times, but can this pillar of the international financial system adapt to an era of rapid geopolitical changes and rising nationalism?

The World Bank's headquarters in Washington DC. David Malpass' appointment as president marks a new era for the World Bank Group and its five subsidiaries  

In his first interview as the new president of the World Bank,

David Malpass tried to strike a conciliatory tone, alleviating concerns over his previously polemical attitude. And yet, he couldn’t resist making remarks that in different times would cause uproar. He told CNBC: “There are challenges facing the world in terms of how you have transparent projects that are high quality [and] where the debt is transparent. China moved so fast that in some parts of the world, there is just too much debt.”

It was because of comments like these that consternation was expressed across the international development community when Malpass was elected president of the bank in April. Similarly to other Donald Trump appointees, the former chief economist of Bear Stearns holds a deep distrust of the organisation he leads: as undersecretary of the Treasury’s Office of International Affairs, he expressed doubts over the relevance of multilateral institutions, stating that “globalism and multilateralism have gone substantially too far, to the point that they are hurting US and global growth”. Christopher Kilby, a professor of economics and an expert in development aid at Villanova University, told World Finance: “Growth alone is the wrong metric to assess the merits of an organisation like the World Bank. If Malpass does take this as the sole objective, his agenda will be very different from that of previous World Bank presidents – and from the major European stakeholders.”

A divergence of objectives between the US and European stakeholders will make the new president’s work more difficult, according to Kilby. “That is likely to accelerate a trend towards special purpose ‘trust funds’ at the World Bank, where individual donors give funds for specific purposes rather than contributing to the general budget,” he told World Finance. “This tends to undermine multilateralism, in the sense of shared decision-making, and also makes administration more difficult. Overall, funding levels might not change that much, but the leadership role of the World Bank is likely to suffer.”

• Worldfinance