Shaping a positive future for the World Bank and other multilateral institutions
“Humanity owes the child the best it has to give.” The words of our founder, Eglantyne Jebb, remain as relevant today as originally 100 years ago.
It is impossible to read it without reflecting on the ways the world could do more for the poorest and most vulnerable children. Right now, a central concern I have is that global multilateral institutions, a central pillar in ensuring the attainment of child rights, are being put at risk due to financial uncertainty.
Aid cuts are directly impacting lives and risking the future of global institutions
A dominating theme this year has been the continued reduction in official development assistance (ODA) by some of the world’s richest nations. At the front and centre of these decisions are the devastating direct impacts on the world’s poorest children, which we are witnessing first-hand in countries like Somalia. Unfortunately, these impacts are just the tip of the iceberg. Look under the surface and there are very worrying signs for institutions that are the bedrock of delivering an effective multilateral system to best support children.
That’s very worrying. As a global community, we urgently need to address it.
Bedrock institutions
There are worrying signs for institutions that were created following the second world war and are the foundation of the multilateral system – like the World Bank, World Health Organization and others within the UN system. Many are now undergoing reform processes indelibly linked to dealing with funding shortfalls.
In the 80 years since their creation, these institutions have proved their value time and time, whether in periods of crisis, such as COVID-19, or in support of long-term global development and peace objectives. Over time they have built up unique roles, comparative advantages and expertise which, if weakened, would be a significant loss not only to the millions of children they directly support each year to survive and thrive, but to humanity as a whole.
Institutional reform is needed, yet there are danger signs in the current approach
While it’s essential these institutions remain relevant and effective in a changing global environment, the processes to make sure that happens can’t be driven by cost-cutting measures – as is currently the case. The prevailing narrative around reform agendas for these institutions reflects calls by key governments who fund them to ‘do more with less’.
I don’t believe this a constructive starting point to conduct reforms. Although these institutions might indeed be able to do more with less, the danger signs are already there.
The first danger is of a lopsided approach where you do more of what you can do and less of what is needed. The current retreat from institutions bridging the humanitarian–development nexus is a case in point. The second risk is that stretching of human and financial resources ever further will eventually mean the elastic band snaps and the system collapses.
Raise the ambition
As a global community, we urgently need to flip this approach on its head. So, we start with what needs addressing and what the value of these institutions is. And we pose the question, would there be a net benefit for the world if these institutions could ‘do more with more’.
I strongly believe that yes, they could. But the process to get there needs to change.
Innovation at the heart
With the current landscape of reducing grant support for multilateral institutions, it’s probably unrealistic simply to call for the world’s richest countries to step back up. While I will continue to argue strongly for the value in them doing that, we need at the same time a seismic shift in approach. So that we move away from substantial grant resources provided by a few countries and towards and approach framed around collective responsibility, with innovation at its heart.
A good example is the World Bank, whose Annual Meetings are taking place next week and which provides critical financial support to assist millions of children each year. Grant resources for the World Bank’s International Development Association (IDA), which supports the world’s lowest income countries, have been in decline for many years – over the last 17 years they have fallen by a third in real terms. Despite this, there is a positive story of how they have innovated to increase IDA’s total resources. In 2018, the World Bank successfully changed its outlook from doing ‘more with less’ to ‘more with more’ when it began boosting resources available to client governments through accessing capital markets. Alongside stretching their balance sheets, successfully expanding the number of contributing governments to 61, total resources within IDA 21st replenishment (IDA21) grew to a high of up to US$100 billion.
However, with overall grant support reducing and rising costs of commercial borrowing, this approach alone has reached the ceiling of what’s possible, with a serious risk of future decline. Given the ever-increasing demand by client governments for IDA funding to bridge growing financing gaps, there is a critical need to innovate again.
Signs of hope
Thankfully, World Bank staff, following agreement from shareholders, are working on options in three specific areas:
Non-grant resources from governments – seeking additional support from contributing governments, including guarantees, which are additional to ODA commitments.
Increasing number of contributing governments - Expanding the donor base, to mobilise more grant resources will be critical not only to maintain IDA’s long-term financial sustainability and scaling up support to countries at risk of debt distress.
Non-sovereign support – Capital contributions from non-government entities, such as philanthropic organisations.
Some of this work is starting to bear fruit. For example, the French government recently provided the first ever portfolio guarantee to the IDA, which boosted IDA21 resources by over $300 million.
The need for a collective vision
However, much more work is needed to maximise ambitions. What is fundamentally lacking is a collectively owned vision and strategy, to ensure the IDA and the World Bank more broadly are financially sustainable, meeting the demands placed on them, fit for purpose, and operationally effective.
This is not a burden that a limited number of people or governments can or should take on. This is about a global community having a shared responsibility to ensure the World Bank and other vital multilateral institutions effectively reach children today and tomorrow with “the best they have to give”.
That’s why, at the World Bank annual meetings next week and at other forthcoming multilateral institutional meetings, I’ll be urging the global community to put the ‘more with more’ agenda front and centre of reform, with innovation and inclusivity at its heart.
