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

WASHINGTON (AFP) – 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, traditional alliances, trade relations and the US Supreme Court, Trump now could have a chance to influence how countries like China access concessional lending.

But if Trump 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.

As the biggest shareholder, the United States has sway over the selection of the new World Bank president, a post for 75 years always filled by an American, 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, especially as there have been growing calls for the institution to be guided by someone from the countries it serves.

World Bank President Jim Yong Kim delivers a speech during the ‘reinvented toilet expo’ in Beijing. – AFP

“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.

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. And given a “very unpopular” American president, there are certain to be challengers in the process to replace Kim, said Morris, of the Center for Global Development.

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

With the US attitude toward the bank’s goals of reducing global poverty ranging from neglect to active attacks, Kim may find working with a private organisation will allow him to effect change more quickly than at a major multilateral institution.

In a note to staff, Kim 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.”

As Trump and his trade team have focussed on aggressive trade negotiations, especially with China, the US Treasury Department has regularly, though with less fanfare, 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” USD13 billion increase in the bank’s lending capacity.

That deal, reached under the specter of a US veto, included an 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.

Morris, the former Treasury official, said the importance of the post to the White House has been exaggerated, but it could be the kind of fight Trump relishes.

“Frankly in the scheme of things I don’t think it matters that much,” he said.

But for Trump, “these are the kinds of things that seem to matter more to him than actual policy. You could imagine that they would end up breaking a lot of eggs over it.”

World Bank CEO Kristalina Georgieva will serve as interim president upon Kim’s February 1 departure.