U.S. Treasury Secretary Janet Yellen urged the World Bank to map out "bolder and more imaginative" steps on Thursday to address global challenges such as climate change even as it continues to aid individual developing countries.
Yellen said countries urgently needed the World Bank and other multilateral development banks to evolve, given declining progress addressing global poverty that began even before the COVID-19 pandemic.
"The world has changed, and we need these vital institutions to change along with it," she said. "In today’s world, sustained progress on poverty alleviation and economic development is simply not possible without addressing the global challenges that face us all."
Yellen said her recent trip to three African countries - Senegal, Zambia and South Africa - underscored the impact of fragility, conflict and climate change on those economies.
She said the current model of multilateral development banks lets countries borrow for investments at home, but that was "insufficient" for challenges such as pandemics and climate change, which often hit the world's poorest countries hardest.
A World Bank spokesperson said after Yellen's remarks that the lender appreciates support from the United States and other shareholders "for finding ways to ramp up development finance to meet global challenges such as climate change, fragility, and pandemics. We see this support as a recognition by the global community of the World Bank’s longstanding responsiveness and effectiveness, and we always welcome new ideas.”
Yellen said the World Bank's evolution roadmap provided a discussion guide but more work was needed, including a vision that prioritized global issues in its twin goals of reducing poverty and shared prosperity.
The bank also needed to create the right incentives, including lowering investment costs, to make these types of projects economically viable, Yellen said. "Since the global community benefits from these investments, the global community should help bear their cost," she said.
She said Treasury was asking the Bank to identify concessional resources - low or zero-interest loans - to help countries tackle global challenges.
Such resources could help decommission coal plants and protect displaced workers during a clean energy transition, she said.
The bank also needed new diagnostic tools to identify global challenges affecting development, and it needs to boost its financial capacity, she said.
"The Bank must be bolder and more imaginative in its operational approach," she said, adding that sub-national entities such as cities could also play a bigger role.
Yellen said a report prepared last year for the Group of 20 major economies included some promising ideas, including securing private sector portfolios or piloting the issuance of subordinated debt instruments.
Stronger mobilization of private capital and domestic resources would also be crucial, Yellen said.
She said real progress had been made on the issue over the past four months and Washington was coordinating closely with India, this year's president of the G20.
(Reporting by Andrea Shalal and David Lawder; Editing by Josie Kao)
