The World Bank Group: giant for development

INTERVIEW – What is the role of the World Bank and the other multilateral development banks? Our compatriot Nathalie Francken – a director at the World Bank Group and a former employee of our FPS – gave us a detailed explanation (part 2).

In part 1, we discussed the challenges of the World Bank Group in the current geopolitical context, here we go into detail about the importance of the World Bank and Belgium's role within the World Bank.

Everyone has heard about the World Bank, but what exactly is it?

The World Bank – along with its sister organisation the International Monetary Fund, or IMF – was established shortly after World War II. People call them the Bretton Woods institutions. Initially, they were to focus on rebuilding Europe. But South American countries insisted that they also be committed to development. Hence why one of the institutions within the World Bank Group – the World Bank actually includes four institutions, see box – is called the International Bank for Reconstruction and Development (IBRD).

The main objectives of the World Bank Group, called the twin goals, are to reduce poverty and ensure shared prosperity with a special focus on the poorest of the poor, all on a liveable and sustainable planet. This involves fostering inclusive growth and countering inequality by strengthening the capacity of governments and promoting a sustainable business environment. At the same time, we also have great regard to sustainably combating climate change.

The World Bank Group is a multilateral development bank that operates as a 'global cooperative': the international community acts as its shareholder. For example, 189 countries have a seat at the IBRD; at the International Development Association (IDA), there are 175. The US is the largest shareholder.

Its governance is in the hands of the Board of Governors, which mainly includes governments. They have delegated most of their decision-making power to a 25-member Board of Directors. I sit on this board as a representative of nine countries.

How does the World Bank relate to the IMF?

As a sister organisation of the World Bank, the IMF – with its 191 members – is primarily concerned with 'macro-economic stability'. It supports economic policies that promote financial stability and monetary cooperation. When a country gets into financial trouble and stability is threatened – such as Greece during the euro crisis in 2010 – the IMF provides the necessary support. So the IMF clearly has a different mandate than the World Bank. At the same time, they work closely together on issues such as good financial management, sustainable debt management or fiscal policy.

So what are the other multilateral development banks?

After the creation of the World Bank Group, additional development banks (Multilateral Development Banks or MDBs) were gradually established that focused on a specific region. These regional MDBs are sister organisations of the World Bank Group that share the same goal.

Belgium has active representation in the African Development Bank, the West African Development Bank, the Inter-American Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development, as well as, of course, in the European Investment Bank, with a small but growing external mandate. In total, there are more than 20 multilateral development banks.

What does the World Bank do specifically?

As a financial institution, the World Bank provides technical assistance and financial support to middle and low-income countries for a wide range of projects: from infrastructure and renewable energy through social protection to healthcare. If a country faces a problem, the World Bank, as an international knowledge institution, can also provide highly valued advice, in all possible fields.

Several large middle-income countries, such as China and India, greatly value the World Bank's advice. These countries also receive financial support. They work well with the World Bank and take its advice to heart. This is very positive.

Another thing nice to know is that the World Bank regularly calls on Belgian expertise within our universities and research institutions, such as VITO. These include topics such as sustainable development, fragility and the links between humanitarian aid, development cooperation and peace-building – especially in the Sahel and Central Africa – and public financial management. The latter is not only about levying taxes, but also about spending money effectively. The Belgian development agency (Enabel) and the Belgian Investment Company for Developing Countries (BIO) also exchange expertise with the World Bank.

What does the World Bank do for a country like DR Congo, for example?

In DR Congo, the World Bank aims to stabilise the region, strengthening good governance and human development. The focus is on access to high-quality basic services. Currently, the World Bank Group has a portfolio of about $8.4 billion for a wide range of projects. One of the most ambitious projects supports the DR Congo government's education policy and aims to give all children free access to sound primary education.

In addition, the World Bank works closely with other development partners there, such as Enabel. This collaboration proved crucial during the COVID-19 crisis and remains important for water and sanitary facilities. Only 19% of the Congolese population has access to electricity. The World Bank Group helps the government to expand and improve sustainable energy supplies. We are often approached by colleagues from other countries – including the US – to share our insights and expertise on Congo.

Does the World Bank play an important role in development?

The World Bank is a leading player in the international development debate. Not only because of the scale of its operations, but also as a knowledge institution, the bank determines the direction for the international community.

In addition, 'financial leverage' makes the World Bank a unique player in the international community. Because thanks to its access to financial markets, every euro a country like Belgium contributes to the bank translates into 4 to 8 euros in support for the countries in which the bank operates. This is an extremely efficient way to use scarce funding for development cooperation.

A great many countries also seem to be increasingly aware of this. Look at the Netherlands, for example. There, the brand-new government has decided – regrettably – to spend less on development cooperation, but it does remain strongly committed to the World Bank. Why? Because its work is crucial to stability and security. It can address problems that an individual country cannot handle. The present evolution towards a multipolar world is not good for prosperity, the Dutch government believes, and the World Bank can adjust that.

Another indication. MOPAN – an organisation that vets international institutions – invariably gives the World Bank green to dark green scores. So we are doing very well. At all levels, we put taxpayers' money to good use.

In all major crises – COVID19 in the past, today the reconstruction of Syria, Ukraine, Gaza, etc. – the World Bank plays a very important role geopolitically, both financially and in terms of expertise. To illustrate, between April 2020 and March 2021, the World Bank has pledged more than $200 billion – an unprecedented level of financial support – to public and private sector clients to combat the effects of the COVID-19 pandemic. And since February 2022, we have mobilised over $57 billion in financial support for Ukraine.

What influence does Belgium have within the MDBs? What is the role of the FPS Foreign Affairs and the FPS Finance in this?

At most development banks, the Belgian Finance Minister is a governor and the Development Cooperation Minister is a vice-governor. But at the African Development Bank and the West African Development Bank, it is the other way around. And at the IMF, the governor of the National Bank is a governor and the Finance Minister is a vice-governor.

With the expertise we can bring together – from the administrations involved, our network of embassies and consulates, and partners such as Enabel and BIO – we aim as a team to weigh in as best we can on discussions important to Belgium. These include topics such as the fragility approach, gender equality, sound financial management and operational efficiency and effectiveness.

For the World Bank, there is an agreement between Foreign Affairs and Finance. The FPS Finance provides the director (or deputy director) – my current role – and a consultant. The FPS Foreign Affairs – specifically the Directorate General for Development Cooperation – is responsible for filling the post of senior adviser.

Belgium is certainly well represented at the World Bank, but it will be essential going forward to maintain our contribution.

Read also part 1 of the interview: The World Bank Group in the current geopolitical context