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This Week in Global Development
Inside the World Bank Spring Meetings
00:27:06
Against the backdrop of the https://www.devex.com/focus/worldbank, Devex reporters Adva Saldinger, Michael Igoe, and Ayenat Mersie dissect the stories they’ve been hearing on the ground this week. That...
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- [00:04]
A
My name is Abbas Saldinger and you're listening to this Week in Global Development, hosted by myself, Rumby Chikamba and David Ainsworth. Hello and welcome to this Week in Global Development. This week we're coming to you live from Washington, D.C. where we have the rare chance to record one of these in person. So I'm joined today by my colleagues Michael Igoe and Ayanat Mersey, and we're gonna talk a little bit about the many meetings and conversations that we've been running around D.C. covering this week. I wanted to start by talking a little bit about a story that actually came out at the end of last week, which is the official Development assistance numbers which showed that official development assistance dropped pretty significantly last year. And I think, you know, as we came into this week, and certainly for our event here at the Capital Summit, really a lot of the thinking is about what comes next in development. And I know I had a conversation with Orancha Gonzalez and Yemi Basinbanjo and Alexia La Tortu here about to of the work they're doing to sort of re envision the next chapter of development cooperation. But, Michael, maybe you could talk to us a little bit about those ODA numbers and the conversation you had with the DAC chair about sort of where these things sit.
- [01:13]
B
Sure, yeah. It's so good to be with you guys in person. This is great. Not only are we in Washington, D.C. we're at the Devex Capital Summit. If you hear some buzz in the background, that's what's going on. Yeah. So this is pretty stark backdrop for the World bank spring meetings. The OECD announcing essentially the week before these meetings started that global official development assistance funding dropped 25% last year, the largest decline on record, driven by the top five donors all cutting back. The US Obviously being kind of the most dramatic of Those, with a $38 billion cut when all was said and done last year. So it's the inescapable reality that I think has framed just about everything this week. And you're right. I think the big question is what comes next? And my impression is that there are a lot of folks trying to answer that question. As you mentioned, I had a chance to speak with the DAC chair, Carsten Sauer, and he told me that there, by the OECDS count, there are 19 different efforts currently underway to sort of reimagine development for the next era. The OECD is hopefully taking it upon themselves to have a conference to try to pull those things together and see if There are some areas of overlap that can sort of paint a more coherent vision. But I was thinking about sort of the World bank spring meetings and how different it feels this year. You know, there's a. There's a significant internal reorganization going on at the World bank right now. I think five years ago that would have been the thing that everybody was talking about and it would have been the big story that we were covering. This year we're talking about the total reimagination and rein reinvention of global development cooperation. It just feels like the conversation has grown and escalated and gone back to sort of first principles in a way that I have not ever experienced in a decade or so of reporting on these issues. And it's a community in flux, so we'll see where things go. But the level of sort of introspection, but also rebuilding that's happening right now, so much seems to be about recapturing a sort of public consensus that this is all work that's worth doing. How do you connect with, with the general public, the taxpaying public, but also political leaders, again, reconnect with them, rebuild constituencies? It's really fundamental questions that seem to be up in the air right now.
- [03:53]
A
Yeah, absolutely. I think in addition to the backdrop of the ODA cuts, the other thing that I think has sort of permeated conversations this week, even though it's not really on the formal agenda, is the war with Iran and the conflict in the Middle East. And when I interviewed Ana Bierda yesterday at the Capital Summit, she said, look, that's the number one thing it's come up in every single conversation they're having. And I think partly because we've seen such a decline, people are turning to the World bank and saying, what will be your response? How will you step up? Not just the World bank, the IMF as well. And some people think that the response, especially when you compare it to how these institutions responded to shocks resulting from the Russian invasion in Ukraine or to Covid, has been a bit slow. And some people have questioned whether that's because, you know, one of the, you know, the primary, you know, the largest shareholder of these institutions is part of this conflict in the United States. And so how does that shape their response? But we did hear some details this week, though. I think, you know, hopefully we'll learn more about the actual response and the uptake. Because one thing I thought was interesting is that the World bank does have a sort of crisis response mechanism that countries can tap. But what Ajay Banga, the World Bank President said earlier this week is that no one has capped that yet. Countries are trying to figure out what they need, and countries in some cases are in a rather precarious situation where they might have to borrow to respond to this conflict, but they are in significant debt distress. So I think we're seeing some of those tensions play out in the conversations. And, you know, you mentioned this, the major World bank reform that's going on. I think some people don't recognize actually the breadth of what's happening at the institution. This is, you know, and I think because we sort of hear it piecemeal, they've been very quiet about the way they're doing it. But, you know, we reported earlier this week, for example, that the climate teams from the public and private sides of the bank have been merged. I was just looking at the sort of environmental and social assessment team and talking to the head of that team and that those teams have merged and they're looking at cutting staff 10%, though they say it's largely going to be through voluntary sort of agreements and things like that. But we are seeing sort of really massive changes in how the bank operates and a lot of questions about what that means for efficiencies. I think one thing that struck me today is a woman said, look, I'm from Egypt. The IFC has me in one region, the World bank has me, and it has me in a different region. So from a practical perspective, as you're doing this, like, can you, can you figure out where we fit? Right? So I think that, you know, the, the bank is in some ways moving quickly, but there's still a lot of questions about how that works. And I think it's creating a lot of internal unrest. And, you know, these types of changes always will, but I think in this case, it can have a really dramatic impact for staff. And I think people are very worried about jobs, but more than that, really not necessarily completely bought in to the changes, maybe questioning some of them. So it's something that we'll obviously continue to follow. But you know, what the bank, I think, would like us to be talking about is one of the big initiatives that they announced this week called Water Forward and Ainat, I'm wondering if you can tell us a little bit about Water Forward and sort of what you're hearing from people about it.
- [07:25]
C
Yes, indeed. It feels like really it's the year for water. Everyone is talking about it this year. And so Water Forward just announced it is a World Bank's initiative to try and get 1 billion people access to water. And they're doing this in collaboration with a lot of other partners, a lot of other MDBs, we have AfDB, Asian Development Bank, Islamic Development Bank, a lot of other partners involved. And they're doing this through the same similar model with what we've seen. And it's something like Mission 300, if you guys have been following it, and Agriconnect, which are other two huge programs, the first on electricity, the second one on agriculture. And they're basically like all asking like, how do we fundamentally fix these huge sectors that are causing us lots of problems and are really fundamental for economies. So electricity, agriculture, water, they operate in a similar way. So each country that wants to get involved in it has to make a compact in collaboration with the World Bank. And so these are called like nationally led compacts. And the idea is that they're really led by the governments and by their priorities. So they'll set out and say, hey, we know that we have a water problem. Of course we do. You know, these are governments that are functioning, they know very well what their problems are. And they'll say, this is what we'd like to do. This is what the financing we need in order to get that done is. And so like, this is what this is important that we need. And so right now, I mean, as of yesterday, when the World bank launches Program Water forward, it launched 14 compacts. So the idea is that, you know, this is kind of the initial cohort of countries that will be participating in this program and then it'll roll out to a growing number. We have 14 and half of those are in Africa, includes Kenya, Senegal, DRC and a few others. Angola I know is on there as well, so that'll be interesting. They've also released the documents on the so you can take a closer look to see what they entail. But it is an interesting thing that we've seen them kind of do this exact same model in such quick succession.
- [09:10]
A
So also on agriculture in the fall, and actually I asked Annabirde about this because I said, look, this is kind of a, it feels like this is the real push that the World bank is creating these big initiatives around key target areas that they're trying to address. And I had asked someone else about this last week because I'm wondering, does this work and does it work in every sector? Does it work for every goal that you're doing? Because the way I look at it, especially the market economics on the private side in energy are very different than in water. So how do you apply the same model, does it work? Who's driving it? But Anivira said it's really part of a new operating model for the bank. They think these big initiatives really will help focus attention, it helps crowd in others. And so I think we'll see. Yeah. Do you want to chime in?
- [10:00]
C
I was just going to say one thing that struck me in yesterday's conversation about the launch event at Water Forward was that Ajay Banga also had Aliko Dangote on stage. And of course, is the conglomerate. I don't know how you even describe Dangote to Dangote, you know, like. And one thing that he said which I thought was really interesting, he said just, you know, about water. He said it just needs the right cooperation with government, the right policies, but what he did with energy, he can do with water. Banga said that about Dangote, and I was kind of scratching my head. I was like, can he. Like, I don't know what the returns are for water and for the private sector more broadly, but there was really this, you know, putting Dangote front and center. This water event seemed really interesting.
- [10:43]
A
Yeah. And that water isn't about a social good, but water really underpins economic growth and job creation, which I think is really the message the bank was trying to put across, that we're, you know, we're making these commitments on water, on energy, on health, because we're all, all those things help us achieve this goal of creating more jobs.
- [11:00]
B
It's also, this is an aside, but a long and thorny history of tension between water and the private sector that I'm sure that they'll have to cross at some point. But I have heard a little bit of pushback to this sort of emerging model or this new kind of pattern of World bank operations focusing on one sector drilling down, sort of making a big splash about it. And the pushback that I've heard, I think it came mostly from Charles Kenny over at the center for Global Development, at least in the iteration that I heard was the bank typically is demand driven from its client countries. The way that it functions and the sort of, you know, the operational model that it considers to be its comparative advantage is being responsive to country needs. And that's a little different, maybe very different. I think it probably depends how things play out in the details. But then saying the thing that everybody should focus on is water, or the thing that everybody should focus on is electricity, obviously there's plenty of work to do in those domains, but it does sort of shift a little bit. The kind of push pull mentality that I think has characterized the World bank for a long time. So, you know, there's, it seems like there's some trade offs there and I'm sure smart people at the World bank are thinking about them and, and gathering feedback on that as well. And again, these are big umbrella challenges that require attention and require resources. But I do think it's an interesting shift in sort of the bank's relationship with its client countries.
- [12:47]
A
Are you interested in the intersection of business and social impact? Do you want to know how corporate sustainability, esg impact, investors investing and more can contribute to development finance? My name is Advaah Saldinger. I'm a senior reporter at devex and I've been reporting on these issues for nearly a decade. I'm the author of Devex Invested, our free weekly newsletter dedicated to development finance. Every Tuesday we explore how companies, investors and market mechanisms are reshaping the world of development finance. Visit devex.com and join us on Tuesdays. My guess is the banks argument would be that one countries can sort of opt in to which initiative they find is most important. And they're creating these compacts which really are about driving country priorities and having them set out, here's what we need on water and that it's really differentiated by country and what their needs are because some countries actually have a lot of water and so maybe they could be net water suppliers. So what, you know, they could help their neighbors and that could be a source of income and things like that. So I, I take your point. I think there's a lot of Charles Kenny's part Charles Kenny point and but I think the bank would have sort of a counter argument that, you know, fake countries can pick and choose which of these are applicable to them. I think one of the other things that, you know, I've talked to a few people about this week is one of the things that there was a report out earlier this week from the ONE campaign. And that report said that borrowing costs for African countries, including from the World bank, have really increased. And that in some countries, I don't know if they're on the African continent or not always. But in some countries the actual borrowing rates that countries are getting from the World bank are very close to what they can borrow from capital markets. And so that I think also changes the value proposition of the bank. And so then the question becomes if the money is, you know, the cost is roughly equivalent, the bank is often slower, why do countries choose to go with the bank? So I think one of the things the bank is also trying to figure out is leaning more into the sort of knowledge bank, the policy support. So what does it provide in addition to its loans that can differentiate it and make it relevant in today's world, given those sort of changing dynamics, I
- [15:14]
B
think the push that they might also get that a company is that would be to take more risk. Right. And to, you know, if countries have alternatives on the financial markets to borrow, then the bank should say, we've got our triple, triple A credit rating and we can take the risk that those markets are not going to take at the same price. So that's another sort of nudge that I've heard repeated around here this week.
- [15:37]
A
Why are World bank rates so high? But I think part of the question then becomes the business model is that the World bank is borrowing on capital markets and then obviously on lending using their lower rates from the aaa. But maybe that depending on how much you're borrowing, how does that constrain your sort of risk approach and things like that? And, and look, I think one of the things that we've seen evolving is some of the credit rating agencies taking a different look on at MDB Capital and saying, actually you could probably lend more. And so I think one of the things that will be interesting to me is like, how do banks lean in? Especially, you know, now we're seeing in a crisis, they often say we're here to be countercyclical institutions. How do they lean into some of that? Are they spending this additional headroom that they've spent so long through all these capital adequacy framework or farms getting to. And I think we haven't quite seen that yet.
- [16:31]
B
Particularly if we start to see a fertilizer crisis and a food crisis after that. Yeah. Are we in sort of another major liquidity crisis that requires the bank's intervention?
- [16:43]
A
And I think the answer on fertilizer is that planting seasons have already started in some places with less fertilizer or more expensive fertilizer, so people can't use it. And I can't remember the exact number, but in the tens of millions. The IMF has already said that they expect tens of millions more people to be pushed into food insecurity as a result of the conflict just today. Right. And it's uncertain how long it's going to last. So I think that there are, there are a lot of questions still about how these institutions step up, what tools they're actually bringing to the table. One of the things that I thought was notable was that Krisalina Georgieva said, hey, look, we're pretty well capitalized, but actually we don't have a lot of that concessional money and we didn't estimate there would be this many crises. And so we might actually need more money more quickly than we told you we would to help provide lower cost subsidized loans to poorer countries. And that the, the IMF debt relief that they provided in the wake of COVID through grants essentially to countries to sort of suspect cover their debt payments to the imf, that fund has nearly run out. And so she was like extolling people in the crowd to talk to, you know, folks from donor countries or think about how do you repurpose special drawing or, you know, and try to find a way to better fund that account so that the IMF isn't broke. Which I think is kind of a funny sentiment to begin with. I'm curious, what, what other conversations or themes are coming up for you? I know that one of the things you were talking to people about is this sort of en vogue idea around African corridors and how we should have messed in that.
- [18:23]
C
Yes, indeed.
- [18:25]
B
Yeah.
- [18:25]
C
As we were talking about, corridors are definitely nothing new, but they're somehow having a very sexy moment right now. And in part because of, you know, there's this big push after the libido corridor and its perceived success in southwestern Africa. So I went to an event on Monday and it was jam packed. It was all about corridors, like standing room only. I got there five minutes early and was still standing nice, actually. Yes, absolutely. And so just, I think went to show the, the level of excitement and interest. And I, and I'm not sure, you know, is this, is this a reflection of the, you know, changing priorities in Washington, that these are the types of projects that people can get behind, perhaps. I know that at the AU summit that I was at a couple of like in February as well, this became a really big priority as well. So I think that, you know, I wouldn't be surprised if there's just a continued push at these institutions to talk more about these corridors. But the big thing that people are emphasizing is that they can't be like the corridors of yore, which is just like, you know, getting minerals from inland and taking them to a port and like nothing happens in between. Right. It has to be actual development along the corridors to make sure that people along inlet with the whole corridor line actually, you know, get benefits from it. Otherwise it's just kind of another extractive mechanism. So I think that's what people are really, really trying To Emphas underscore here. Another thing that I've been like picking up on, I mean, as I'm sure everyone has seen, is that, you know, climate is really, you know, really, really low on the agenda to say the least. Someone I was just speaking to now said, you know, the more, more optimistic read was that, well, all the climate conversations are happening behind closed doors now instead, so at least I can be a bit more frank. Which I was like, okay, well that's a really nice optimistic way to, to think about it. But that those conversations are really, are not happening that much. And as our colleague Jesse reported out in the beginning of this week, the US was, was basically running out the clock on the World Bank's climate action plan. And that was really confirmed by the US Treasury Secretary's remarks yesterday in which he said we were running out the climate plan basically. And we, you know, it's long overdue that this is happening and that this was, the climate plan was just creating a lot of inefficiency. And so, you know, he said, he said it and confirmed it. And so we're not seeing those conversations happen at all. And we're, you know, people are still talking about relevant issues, but they're doing it through water, they're doing it through agriculture. You know, these are all things that are really climate issues at the end of the day. But you know, if we can talk about them in an indirect way, I guess that's a way to get around it.
- [21:04]
A
Yeah, it's interesting. I had a couple conversations today that I think tie to that one is I interviewed Nadia Calvino, the president of the European Investment bank this morning. And VIB is in a unique position where the US is not one of their shareholders. And so they're saying, hey look, we're still like fully going ahead on climate, on gender. But as they're thinking about, you know, she's taking over leadership of this head of MDV's group later this year or early next year. And so she's like, okay, how are we going to, where are the places that we can work together? So water and resilience, how do we frame this? And I was talking also to an investor who works in emerging markets around sort of climate issues. And he said, look, in many of these countries, especially middle income countries that are facing a real crunch right now, one his fund does commercial returns, so he's finding you can do that. But in these countries, actually the economics tell you that renewable energy is the right thing to do because the cost of renewable is just it's cheaper than other things. So I think that we are seeing some of those things and it's a question of how much the MDBs are just choosing not to talk about this publicly, but continuing to do work. And I think it's a little bit to be determined as we see progress over the next year or two if we do see a drop off in the actual projects.
- [22:31]
C
Yeah, absolutely. And just a little bit of a pivot just in terms of. Another thing that I've been talking to folks about this week has been the main story is definitely like the fallout from the Iran war. And you know, the secondary related story to that is for, for a lot of African countries is what does this mean for all this Gulf investment in Africa? Right. It's there. The Gulf has been pouring in a huge amount of money across the continent for many years and many cases out investing China. So as they look to, you know, maybe prioritize their own domestic priorities in their spending, will this mean a reduction in spending in Africa? And I, I've talked to a few people about this and most of them were relatively optimistic, which I was kind of surprised by. But one of them had, like, you know, one person said, you know, if, if this crisis does anything, it's that it really underscores the fact that the Gulf is really vulnerable to the Strait of Hormuz. Like they are. You know, obviously, like the bottleneck has really has really had a huge effect on them. So what better way do they have to increase their resilience by ensuring that they have very good, consistent access to another strait that is the strait that connects them to the Red Sea. So why would they ever stop investing in places like the Horn of Africa, which ensures there you have continued access to another court. And I was like, yeah, that geography actually makes a lot of sense and I understand why the Horn of Africa investments might not actually go down. So there were some really, like, grounded arguments that I thought, yeah, that that makes a lot of sense. And so, I mean, still, tbd, right. You know, without could reduce his investments. But I think there's a really good business case and survival case really for them to not.
- [24:08]
B
Yeah. I'll just add that I think that's like a really prevalent theme throughout is sort of the more explicit emphasis on strategic interests in all of this. You know, that we mentioned the OECD numbers at the top and the decline in oda. It's because Europe is having to invest more in defense spending and is facing like, massive budget pressure as a result. Obviously the US which drove whatever it was, two thirds of that drop, or 3/4 rather. The Trump administration has been extraordinarily explicit about tying everything to strategic, commercial or geopolitical interests. I just think that's that conversation has been so much clearer this year. And in a way, in the example like the one that you just shared with Gulf countries, it feels a little bit more direct. I don't know if honest is the right word, but it allows a conversation to happen, right? Like countries seem to be bringing their interests to the table in a more honestly, a more transparent way now rather than, and maybe this isn't great, but emphasizing the sort of global public goods agendas, the shared, you know, sustainable development goals agenda, things like that. It's a real rhetorical and almost sort of theological shift that I think we've seen.
- [25:32]
A
And Ajay Banka talked about how he's had to change how he makes the case to shareholders, for example, with the IDA replenishment at the end of last year. He said, look, almost all my major shareholder governments have changed in the last two years. And what I saw multiple times, and he's like, look, I have to make the case of why it matters to them and to their national security to invest in the World Bank. And so I think that's changed the argument even that the World bank president is making. I sat, sat down, did an interview earlier today with Conor Coleman, the head of investments at the U.S. development Finance Corporation. And, and look, they're right in the midst of this, right? The US Is really focused on sort of, you know, commercial engagement, economic statecraft, this stuff. And, you know, he said, look, we're not the, you know, development finance institution that you saw in the past or an institution that's going to sit somewhere between a development finance institution and a sovereign wealth fund. So I think that's kind of indicative of this change as well. All right. I think we are probably.
- [26:35]
B
I have to get back up on
- [26:36]
A
stage and I know I've got to run to an interview. So. Michael and Ina, thank you both so much for joining me today. This was such a treat to do this.
- [26:49]
C
Sam.