US Treasury Secretary Janet Yellen on Thursday (Oct 6) called for the World Bank Group and other multilateral development banks to revamp their business models to shift from country-specific financing to addressing global needs such as climate change and the harnessing of more private capital.
In prepared remarks for a speech ahead of the World Bank and International Monetary Fund annual meetings, Yellen said she will call on World Bank management to develop an "evolution roadmap" for changes by December, with "deeper work" beginning by the spring of 2023.
"To accelerate this work, my team will step up our engagement with World Bank shareholders and management," Yellen said. "The world cannot afford to delay or lower our ambitions."
Her directive comes just weeks after World Bank President David Malpass came under fire after he declined to say whether he accepts the scientific consensus on global warning. Malpass said his answer to a question on the topic at a forum was mishandled and that he believes human activity is responsible for climate change, but no shareholders asked him to resign.
Yellen said the World Bank and other multilateral development banks (MDBs) need to adopt stronger targets for mobilising private finance and deploy a broader range of instruments, including loan guarantees and insurance products.
"Given the scale of the challenges, the development banks must continue to explore financial innovations to responsibly stretch their existing balance sheets," Yellen said.
She said that MDBs needed to preserve their ability to borrow from financial markets on financial markets, but did not mention the debate over whether they could accept lower credit ratings.
On macroeconomic issues, Yellen said the top priority for countries facing high inflation was to return to an environment of stable prices - a fight she said was primarily the responsibility of central banks.
She said G7 wealthy democracies have "committed to market-determined exchange rates. But we are attentive to the political consequences of exchange rate movements." REUTERS