World Bank chief’s exit could give Trump lever over development lending

Updated January 09, 2019

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NUSA DUA: Jim Yong Kim speaks at the IMF and World Bank annual meetings in Nusa Dua on Oct 12, 2018.—AFP
NUSA DUA: Jim Yong Kim speaks at the IMF and World Bank annual meetings in Nusa Dua on Oct 12, 2018.—AFP

WASHINGTON: The surprise early departure of World Bank President Jim Yong Kim potentially hands US leader Donald Trump a key lever over development lenders with whom his administration has been at odds.

After reshaping the US presidency and shaking up traditional alliances, Trump now could have a chance to influence how countries like China access concessional lending. But if he wants an American in the post, he will need to pick a candidate who can win the support of most shareholders, and will likely face many challengers.

The United States has sway over the selection of the World Bank president with the backing of European nations. But having uprooted those alliances in his two years in office, Trump will find it difficult to simply submit a nominee for acclamation.

“This White House has a pretty challenging path ahead if they think they want to install a candidate,” said Scott Morris, a former US Treasury official who worked with the World Bank and International Monetary Fund (IMF).

The unspoken agreement to have an American lead the World Bank and a European at the IMF has come under fire in recent years, and both institutions have seen candidates from Nigeria and Mexico challenge the current leaders.

Jim Yong Kim, who became the bank’s president in 2012, announced Monday he would step down Feb 1, not even halfway through his second five-year term, to accept an “unexpected” opportunity in the private sector, he told bank staff.

In a note to staff, he said “it’s time for me to take on new challenges and fully focus my efforts on leveraging private finance for the benefit of people around the world.” Following Trump’s aggressive tone with China, the US Treasury Department has regularly criticised the World Bank, for allowing relatively well-off countries like China to borrow from the development lender.

In one of Kim’s signature achievements, he led negotiations to convince shareholders – especially Washington – to agree early last year to a “historic” $13 billion increase in the bank’s lending capacity. The deal included a reform agreement that middle income economies like China would graduate and pay more to borrow from the bank.

But since the US has not even named a representative to sit on the World Bank board, it remains to be seen whether Trump will want to fight for the leadership.

Paul Cadario, who spent his career at the World Bank until he retired and joined the University of Toronto, said the bank is not on Trump’s radar. “There’s no executive director. And the American executive director has always been a leader of the board and the one who conveys the views of the American government,” Cadario told AFP.

Kim announced on Monday that he would step down next month, three years before his current term was due to expire.

“It has been a great honor to serve as president of this remarkable institution, full of passionate individuals dedicated to the mission of ending extreme poverty in our lifetime,” Kim, 59, said in a statement.

World Bank CEO Kristalina Georgieva will serve as interim president upon Kim’s Feb 1 departure, the bank said in a statement.

Published in Dawn, January 9th, 2019