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Tags: yellen | world bank revamp | biden administration | climate change

Yellen Calls for World Bank Revamp to Tackle Global Challenges

Yellen Calls for World Bank Revamp to Tackle Global Challenges
Treasury Secretary Janet Yellen speaks about challenges facing the global economy at the Center for Global Development, Oct. 6, 2022, in Washington, D.C. (Patrick Semansky/AP)

Thursday, 06 October 2022 02:58 PM EDT

U.S. Treasury Secretary Janet Yellen on Thursday 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, in part by harnessing more private capital.

In 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.

'WORLD CANNOT AFFORD TO DELAY'

"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 was made just weeks after World Bank President David Malpass came under fire after he declined to say whether he accepted 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.

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

"We welcome the discussion on capital adequacy and Secretary Yellen's leadership on the evolution of IFIs (international financial institutions) as developing countries face a severe shortage of resources, the risk of a world recession, capital outflows, and heavy debt service burdens," the spokesperson said in an emailed statement.

Yellen made clear that climate change was a prime example of a global challenge that required changes by development banks, calling it "an existential threat to our planet."

She 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 contribution, the first of its kind from the U.S. Treasury, makes good on a U.S. pledge made at the 2021 Group of Seven summit of wealthy democracies alongside other G7 countries, Treasury said.

'FINANCIAL INNOVATIONS'

Yellen said the World Bank and other multilateral development banks (MDBs) need to adopt stronger targets for mobilizing 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 added that there was a case for using more concessional loans and grants to fund investments where benefits are shared more broadly by the world.

"For example, I see a case for concessional financing to help middle-income countries transition away from coal in the context of accelerating the clean energy transition," Yellen said. "If the global community benefits from investments in climate, then the global community should help bear the cost.

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 the G7 members have "committed to market-determined exchange rates. But we are attentive to the political consequences of exchange rate movements."

© 2024 Thomson/Reuters. All rights reserved.


StreetTalk
U.S. Treasury Secretary Janet Yellen on Thursday 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.
yellen, world bank revamp, biden administration, climate change
567
2022-58-06
Thursday, 06 October 2022 02:58 PM
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