World Bank President Talks Strait of Hormuz

Summary

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Bloomberg Talks

Episode: World Bank President Talks Strait of Hormuz
Date: April 9, 2026
Guest: Ajay Banga, President of the World Bank
Location: Washington, D.C. Studio

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Episode Overview

In this timely and globally-focused episode, Bloomberg sits down with World Bank President Ajay Banga to discuss the economic implications of instability in the Strait of Hormuz, which is under threat due to ongoing tensions between the US and Iran. The conversation touches on the potential effects of a protracted disruption on global energy flows, inflation, and developing economies, as well as the World Bank's proactive response strategies. In addition, Banga explores broader macroeconomic themes, including the World Bank’s role in reconstruction in war-affected regions and the future of currency in international lending. The episode wraps with insights on the impact of artificial intelligence on emerging markets’ labor sectors.

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Key Discussion Points & Insights

1. Strait of Hormuz Disruption: Global Economic Risks

• Overview: The discussion opens with concerns over the uncertain ceasefire between the US and Iran, focusing on how possible continued disruption in the Strait of Hormuz could impact global energy and economic stability.
• Notable Insights:
  • The duration and intensity of the disruption are the primary variables under consideration for the World Bank.
  • Banga outlines two main scenarios: a short-term normalization (3-4 months) with moderate impact, and a prolonged disruption (6-8 months) with significant negative effects on growth and inflation.

“The reality is no one knows...One is the length and duration of the disruption, and the second is...kind of damage has happened to facilities.”
— Ajay Banga, (01:13)

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2. Inflation vs. Growth: The Immediate Priorities

• Focus: Banga emphasizes that, particularly for emerging markets, tackling inflation must come before concerns about growth due to the direct and immediate effects of supply chain disruption (oil, gas, fertilizers, chemicals).
• Strategy: Once inflation is controlled, the next policy priority shifts to fostering growth.

“If you had to focus right now, you should be more concerned about inflation, because that's the immediate impact you're feeling of the disruption in all these supplies...”
— Ajay Banga, (02:16)

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3. Fiscal Response Capabilities in Developing Economies

• World Bank Actions:
  • Describes the "crisis response toolkit", allowing countries to reallocate 10% of undispersed project funds for crisis management.
  • Current support liquidity: $20–25 billion rapidly deployable; extended scenario up to $50–60 billion.
  • Stresses the importance of targeted, temporary, and transparent support—advocating digital distribution of subsidies to the most vulnerable instead of broad, inefficient programs.

"Much better than that is to do targeted subsidies to those who are the most affected and in the poorest sections of society, preferably through digital distribution means."
— Ajay Banga, (03:58)

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4. Reconstruction in Conflict Zones

• Middle East & Beyond:
  • The World Bank’s founding purpose includes reconstruction; active roles expected in Gaza, Lebanon, and potentially broader Middle East if conflicts worsen.
  • Notably, wealthier Middle Eastern countries will require World Bank knowledge, not monetary assistance—unlike Gaza, Lebanon, or Ukraine.

“We started as the International bank of Reconstruction and Development, so reconstruction is what we do…Ukraine is much bigger in terms of dollar value than these other ones currently put together.”
— Ajay Banga, (04:57)

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5. Currency Dynamics in Global Lending

• Current & Future Lending Practices:
  • Discussion on potential for Iran to charge transit tolls in yuan (rather than dollars) and what that means for the dollar’s long-standing dominance.
  • Banga sees no imminent shift away from the US dollar as the main reserve and lending currency, although some bilateral deals may occur in other currencies.

“About the last so many years, we've been lending in… the euro, the yen, the pound and the US dollar. And that mix has kind of stayed pretty stable over the years...That's not large enough to challenge where the dollar stands and sits.”
— Ajay Banga, (06:10)

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6. The AI Revolution and Jobs in Developing Economies

• Risks & Opportunities:
  • AI’s disruptive potential for labor markets—even before the current crisis—remains a major concern, especially for countries reliant on labor outsourcing.
  • Banga sees AI as both a challenge and a significant opportunity for emerging economies:
    • In the next 15 years, 1.2 billion young people will come of age in the developing world; job creation is projected to fall short by hundreds of millions.
    • Emphasizes leveraging “small AI” for empowering farmers, health workers, and educators at the local level, turning disruption into productive transformation.

“If those people have productive jobs, productive contribution to society... then you get great markets for our future products, technology, intellectual property... But if you don't, then you have instability and illegal migration.”
— Ajay Banga, (07:45)

“The applications of this kind of AI will actually be great answers for the emerging markets. And that's the way to see this from the other lens as compared to only the lens of a threat.”
— Ajay Banga, (09:11)

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Notable Quotes With Timestamps

• On scenario planning:
  “We’ve got a scenario that says that if it comes to a cease fire now and three to four months of normalization, we have some impact on growth, some impact on inflation, both on the wrong side. But…if this becomes a six to eight month impact…that’s a very different impact on growth and inflation.” (01:24)

• On targeted subsidies:
  "None of these countries have the headroom to, let's say, do a permanent fuel subsidy." (03:45)

• On global currency shifts:
  "You want the country to be fully free and floating for you to know that it's a currency you would hold and trade and do business in. And I think that part is still very much a challenge for many other currencies." (06:33)

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Timestamps for Important Segments

• Opening Context & Risks for the Strait of Hormuz: 00:34–02:11
• Inflation vs. Growth Prioritization: 02:11–02:47
• Crisis Response and Fiscal Strategies: 02:47–04:37
• Reconstruction and Regional Roles: 04:37–05:41
• Currency in International Lending: 05:41–07:05
• AI and the Future of Employment in Emerging Markets: 07:05–09:27

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Memorable Moments

• Banga’s clarity on the dangers of broad-based subsidies and the advocacy for digital, targeted aid—showing a modern, technology-driven approach to crisis intervention.
• A nuanced view into the complex, multi-currency reality of global lending—and a measured skepticism toward imminent dethronement of the US dollar.
• The vivid articulation of the demographic challenge facing emerging economies, with AI posited as a transformative force for good if harnessed correctly.

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Conclusion

This episode provides a sweeping view of how global financial institutions like the World Bank are navigating real-time geopolitical crises, the evolving nature of international finance, and revolutionary technological change. Ajay Banga’s insights offer both sober assessments of risks and optimistic strategies for turning post-conflict and technological disruption into catalysts for growth and stability, especially in the world’s most vulnerable regions.

Transcript

[A]

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[B]

Radio News we're joined now on Bloomberg TV and Radio by RJ Banga, the President of the World bank, who is here with us in our Washington, D.C. studio. Thank you for your time. You obviously are joining us at a very tense moment in the Middle east, specifically as we have a lack of clarity as to whether or not the cease fire between the US And Iran is going to be one that can last and whether it will result in a lasting reopening of the Strait of Hormuz, which is obviously critical for global energy flows and the economy. As a result of that, how are you considering the potential economic cascading ripple effects of if a Strait of Hormuz that may not be as free flowing as it was prior to this conflict beginning?

[C]

So thank you for having me. And that's kind of the question that's on everybody's mind. And we've got our spring meetings coming up next week and I'm sure it'll be topic number one there. The reality is no one knows the two dimensions you're trying to solve for. One is the length and duration of the disruption, and the second is right now, while there is some kind of a cease fire, you can make a guess of what kind of damage has happened to facilities. If the conflict were to restart, then what kind of damage continues to happen to energy production facilities is unclear. Those two dimensions are what we're using. We've got a scenario that says that if it comes to a cease fire now and three to four months of normalization, we have some impact on growth, some impact on inflation, both on the wrong side. But if it comes back into a conflict and continues after that and this becomes a six to eight month impact on before it normalizes, not the conflict but the downstream effects. And that's a very different impact on growth and inflation. So that's how we're working.

[B]

And which of those risks in your mind is greater right now on the growth side or on the inflationary side?

[C]

Well, I would say if you were to in the emerging markets where my Focus is if you had to focus right now, if you should be more concerned about inflation, because that's the immediate impact you're feeling of the disruption in all these supplies, whether it's oil or gas or sulfur or helium or fertilizer or downstream chemicals. But when you go out further, and if you're managing to get that inflation under control, then the next big thing to do would be to worry about your growth again. But they're both important. I just prioritize inflation before I went chasing down the growth well.

[B]

And it raises the question, especially for some of these developing economies, if they're feeling the effects of this, they're. They're room to respond from a fiscal policy perspective, how much ability to do that is there if it's necessary?

[C]

Absolutely. So both the IMF and US and other institutions like ours are working through, in what ways can we be helpful to these institutions, to these countries as they respond? So in our case, we have something called a crisis response toolkit, which was launched a couple of years ago. What that does is 10% of the undispersed balances of approved projects in a country. Any project can be diverted for purposes of crisis management under the control of that country's finance ministry. So if you put all that together, you add in a few other projects where they could do this and other work we're doing across our emerging markets, 20 to $25 billion of liquidity could be made available very quickly to our clients. If this continues into that other scenario of longer term, then we're trying to see if we can get to another somewhere between 50 and 60 billion of capacity to help. Having said that, I want to make sure you understand one thing which is, you know, what we do right now has to be done in a way in countries that it's kind of targeted carefully and it's clearly temporary and transparent because none of these countries have the headroom to, let's say, do a permanent fuel subsidy. Much better than that is to do targeted subsidies to those who are the most affected and in the poorest sections of society, preferably through digital distribution means. Many countries across the emerging markets, not just in India or parts of Africa, but many countries now have digitized ways of being able to distribute targeted, you know, benefits to people. And that kind of thing is what I'm referring to, rather than blanket subsidies.

[B]

I also wonder about the effort you think, if at all, that the World bank is going to need to be involved in, in simply reconstruction in the Middle East. I know there is a role to play Specifically in the reconstruction of Gaza. But we're now looking at destruction in Lebanon. We've seen infrastructure damaged in Iran. How active do you expect you will have to get in the region as a whole?

[C]

But we started as the International bank of Reconstruction and Development, so reconstruction is what we do. I think Ukraine, that's the other one.

[B]

Yeah.

[C]

Gaza, Ukraine is much bigger in terms of dollar value than these other ones currently put together. Depends how far the Middle east goes. Remember that the richer countries in the Middle east are not going to need our help on monetary terms. They can certainly use our help in knowledge and expertise, but not monetary. In fact, they're great partners the other way for us. They put money into us to help the developing world. But in Ukraine and Gaza and the like, it's in Lebanon, it's very different. Yes, I presume that we'll have a role to play there. You know, we're actively involved with Ukraine and Gaza anyway.

[B]

And you mentioned dollar value there. And I'd like to focus on that idea of this being lending done in US Dollars because there's a conversation now that if Iran is able to charge a toll in the Strait of Hormuz, it may do so in the yuan rather than the dollar. And whether that precipitates a decline in the dollar that has been long called for and not necessarily materialized as the reserve currency. Is it your expectation that in even the near intermediate term the World bank is going to be less doing less lending in US Dollars, or do you see that as overblown?

[C]

Not really. About the last so many years, we've been lending in two or three currencies, principally four, actually, the euro, the yen, the pound and the US dollar. And that mix has kind of stayed pretty stable over the years. There is some very little demand from countries to borrowing in other currencies. It could change. You never say never. But look, I've been banking a long time and the thing about a currency is that you have to believe that it is fully predictable to you in the sense of no management of the currency beyond what's transparent. Nothing is predictable in currency can go up and down based on how markets think, but you don't want that. You want the country to be fully free and floating for you to know that it's a currency you would hold and trade and do business in. And I think that part is still very much a challenge for many other currencies. Could there be bilateral deals that happen? They're already happening and that could happen, but that's not large enough to challenge where the dollar stands and sits.

[B]

You talk about ups and downs in financial markets. And something else that was a cause of great volatility even prior to the war with Iran beginning was concern about the disruption that we're going to see from artificial intelligence, specifically in. In certain industries and in certain labor markets and demand for labor, especially as you're considering developing economies in which a lot of work has been outsourced that may be susceptible to being replaced by artificial intelligence. How do you prepare the world for that?

[C]

Well, the two topics here. The first is the creation of jobs and roles in the developing world, which is actually one of the focus of our spring meetings. And there the issue is 1.2 billion young people in the developing world are going to become 18 years of age in the coming 15 years. And right now those very same countries are projected to create 400 plus million jobs. Now these are focused economists, make them people like us, you should treat them with a pinch of salt. But it could go up or down, but not by 800 million. So the point is there's both a challenge and an opportunity there. If those people have productive jobs, productive contribution to society, hope and dignity, then you get great markets for our future products, technology, intellectual property, you know, everything else. But if you don't, then you have instability and illegal migration. We're focused on changing that trajectory towards the positive by focusing on five sectors, most of which are actually not reliant either on global trade to be the most important thing or for that matter, directly impacted by the kind of we are discussing, which is LLM. And generationally, in fact, the sectors we are talking about, primary health care, agriculture as a business for small farmers, these are things that can be benefited. Now, what I call small AI, which is AI delivered at the edge with local compute. So illiterate farmer who is able to use a phone to point at the disease of the back of a plant and not know what the name is because she can't pronounce it, but it can tell her this insecticide from your cooperative for 25 rupees in Uttar Pradesh is your answer that's useful. It's true of health care, it's true of education and so on. So the applications of this kind of AI will actually be great answers for the emerging markets. And that's the way to see this from the other lens as compared to only the lens of a threat.

[B]

All right, well, we'll look forward to hearing more about that at the meetings next week. Rjbanga leading the World bank and here with us in our Washington, D.C. studio. Thank you so much for joining us.

[A]

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[D]

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