US Treasury’s Yellen calls for reform of World Bank to tackle global challenges

WASHINGTON, Oct 6 (Reuters) – US Treasury Secretary Janet Yellen on Thursday asked the World Bank Group and other multilateral development banks to shift their business models from country-specific financing to meet global needs like climate change. Exploitation of more private capital.

In a speech ahead of the annual meetings of the World Bank and the International Monetary Fund, Yellen said she would call on World Bank management to develop a “growth roadmap” for the changes by December, with “deep work” beginning by the spring of 2023. .

“To accelerate this work, my team will enhance our engagement with World Bank shareholders and management,” Yellen said. “The world cannot delay or reduce our ambitions.”

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His directive came just weeks after World Bank President David Malpass came under fire for refusing to accept the scientific consensus on the global warning. Malpass said his answer to a question on the subject at a forum was misrepresented and that he believed human activity is responsible for climate change, but that any shareholder asked him to resign. did not say.

A World Bank spokesperson said the institution is actively working to expand climate-related trust funds, grant resources and donor guarantees as it explores ways to increase lending capacity.

“We welcome Secretary Yellen’s leadership on discussions on capital adequacy and the development of IFIs (International Financial Institutions) as developing countries face acute resource shortages, the risk of a world recession, capital outflows and heavy debt servicing burdens,” the spokesperson said in an emailed statement.

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Yellen explained that climate change is a prime example of a global challenge that requires change by development banks, calling it “an existential threat to our planet”.

He announced a $950 million Treasury loan to the Clean Technology Fund (CTF), a multilateral trust fund that helps developing countries accelerate their transition from coal power to clean energy. The Treasury said the contribution, the first of its kind from the US Treasury, builds on US pledges made at the 2021 Group of Seven summit of wealthy democracies along with other G7 countries.

‘Financial Innovation’

Yellen said the World Bank and other multilateral development banks (MDBs) need to adopt stronger targets for mobilizing private finance and deploy a wider range of tools, including credit guarantees and insurance products.

“Given the scale of the challenges, growth banks should continue to explore financial innovations to responsibly grow their existing balance sheets,” Yellen said.

He said there was a case for using more concessional loans and grants to fund investments where the benefits are shared more widely by the world.

“For example, I see a case for concessional financing to help middle-income countries move away from coal in the context of accelerating the clean energy transition,” Yellen said. “If the global community benefits from investing in climate, the global community must help cover the cost.

He added that MDBs need to preserve their ability to borrow from financial markets on financial markets, but did not mention the debate over whether they can accept lower credit ratings.

On macroeconomic issues, Yellen said the top priority for countries facing high inflation is to return to an environment of stable prices – a fight he said was primarily the responsibility of central banks.

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He added that G7 members are “committed to market-determined exchange rates. But we are mindful of the political consequences of exchange rate movements.”

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Reporting by David Lauder and Andrea Schallal; Editing by Paul Simao

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