MDB reform hasn’t gone far enough, while challenges have, says NK Singh

In an interview with HT last week, Singh, who was in Washington for the World Bank-IMF annual meetings, discussed MDB reform in an uncertain global political climate and the implications of a potential change in U.S. administration. Edited excerpts:

It is rare that a year after India’s G20 presidency, its work on MDB reform is still shaping conversations. Looking back, what is the imprint India left that has lasted?

PM Narendra Modi, in 2015, had first given a very far-reaching statement that MDBs needed to be restructured. So, when the opportunity came under the Indian G20 presidency, the finance minister initiated an undertaking to look afresh at the entire model. This led to the creation of the IEG [independent expert group]. The IEG submitted two reports during the presidency itself, it was adopted by the G20 in the last annual meeting in Marrakesh, and reflected in the New Delhi G20 consensus. The Indian presidency has therefore left a lasting imprint on the way in which the dialogue will take place on broader mechanisms of financing the development metrics. As we go ahead, along with the reforms of the MDBs, we need to look at the congruent changes and symmetric changes in the working of the IMF. That requires to be addressed in a fundamental way.

You have given an incomplete grade to the MDBs. What is the response that you have got from the MDBs to your review report?

I don’t think that this grade rate is something which they are very disappointed with because we have also, in the main part of the report, pointed out the significant progress which they have made both in the 33% increase in the total quantum of lending and the positive movement on many of the parameters. But whereas MDBs have made progress, the shareholders have not been as active in realising the objective of the triple agenda, which we had laid out as better, bolder and bigger banks.

Shareholders have to enable MDBs to take decisions which could be viewed as somewhat bolder, but therefore riskier, in being able to harness private capital. Private capital would also have got harnessed more easily if the rating agencies had realised that the shareholders are fully behind this triple agenda.

Therefore, I think that this report is a fairly balanced report. It recognises the progress which has been made, but also recognises the shortfalls in meeting the kind of expectations of the triple agenda which was endorsed by the G20.

You talked about the commitment to the shareholders and the annual meetings are being held just a week before the US elections. There is a possibility that we will see a change in the administration here. The Trump administration, in its first term, made it clear it was not committed to multilateralism, climate was not among its top priorities, it walked out of the Paris Pact. The commitment of the largest shareholder in the World Bank group could potentially be very suspect come next January. So how would you see that?

We will have to wait for the final outcome. We will have to see the attitude, if there is indeed a change of a new administration in addressing the inescapable challenge of the issue of climate, which requires vastly greater financial resources than is available. This requires recognising that unless you have development banks, you will be facing the possibility of creating new institutional structures to address it because you would require some institutional mechanism. They will have to recognise that this may involve a much higher place in the decision-making process, if not to the existing shareholder, then perhaps to one of our important neighbours. And that may be a choice which may not be such an attractive prospect — of creating structures which can be dominated by a different configuration of countries.

But it’s somewhat early to prejudge the outcome. We don’t know. Nothing can be said about an election in a democratic setting until it is finally done. So there’s no point in speculating. And, irrespective of the outcome and in the eventuality that there is a change, it should be recognised that challenges have become much more complex and compounded in terms of geopolitical fragmentation, consequences of wars of various kinds, the extent of investor uncertainty, the risk-averseness, and the fact that the clock on climate is ticking at a rapid pace and time is not on our side.

Given the nature of these challenges, how much of the urgency of addressing them has got embedded in institutional bureaucracies of MDBs and how much still requires top-level political will?

In my view, this is a central question which, as we have brought out, has yet to be addressed in any credible way. The processes and procedures of these institutions still remain somewhat cluttered, somewhat status-quoist and seek to avoid a degree of high risk. So this is an important handicap, for instance in building robust country platforms, which would reflect country priorities in a way that includes climate in a very significant way. This means ensuring that the timeline between conception and disbursement of a project is not 24 to 25 months, but can be significantly shortened, or for instance, in terms of the MDBs acting much more as a family. Some action has begun. They have some degree of commonality in procurement procedures and audit procedures, but there is a long way to go in avoiding replication and ensuring MDBs act as a family. The record in harnessing private capital has been one of the less favourable outcomes of the initiatives which had begun by us. And unless private capital comes in along with domestic resource mobilisation, the finances, no matter what happens, will be inadequate to address the crisis.