The World Bank and IMF Spring Meetings arrive at a moment of increasing global disorder. Both the Bank and the IMF have an important role in helping client countries deal with the associated crises. But the World Bank could play that role far better without the distractions of a damaging internal reorganization that, at least to the outside world, is opaque as to purpose and details.
The Bank must help its client countries deal with the consequences of the Iran war for fuel and food prices, the massive volatility in the global trading regime and a debt crisis that festers thanks to the breakdown of resolution mechanisms. All in an environment of significant cuts in aid flows, slowing private sector investment and potential global stagflation, and when it is also tasked with providing support for Ukraine’s survival and reconstruction as well as a reconstruction effort in Gaza.
The World Bank has played an important role in responding to previous global crises. It launched the largest emergency response in its history in response to COVID-19, committing over $200 billion to 110 client countries between March 2020 and April 2021. It led an unprecedented expansion of social safety nets, with Bank-supported cash transfers reaching 1.1 billion people around the world, while also providing an essential backstop to health systems.
And Bank staff are already responding to the latest crises—from channeling funds to Ukraine’s frontline workers, to trying to create a workable vehicle to support Gaza reconstruction under an intensely controversial governance structure, to helping countries restructure debt, to ramping up policy lending to support countries facing fuel and fertilizer shocks.
The global chaos itself is of course almost completely beyond the control of World Bank management. To paraphrase, they should accept the things they cannot change, and adopt the risk appetite to change the things they can. But one small element of chaos that is under their control is that which reigns within the Bank itself.
Recent reform efforts had a promising beginning: the effort to cut red tape around project preparation reduced the process from a reported average of 19 months to 12. Following the advice of an independent review, the Bank reduced its policy minimum equity-to-loans ratio from 20 percent to 18 percent, generating $70 billion in additional lending capacity.
In the past two years, reforms have responded to shareholder pressures to limit budget and staffing (despite record profits). Not least, the FY26 budget suggested a small real decrease in core administrative funding, which when combined with declining external funding amounted to a drop in resources from $5.4 billion to $5.3 billion.
But the reform effort has spiraled. The centralization of expertise appears to replicate Jim Kim’s “One World Bank Group” model that was widely considered a failure and wound down by David Malpass only a few years after it was introduced. Rumors about the reassignment of country economists from the regions and country offices to the center suggest an institution that simply doesn’t value local knowledge—surprising given the Bank’s recent eschewals of a one-size-fits-all development strategy. Similarly, the restructuring of World Bank research functions appears designed to reduce quality and independence.
Again, the imminent halt to all hiring of short-term consultants—individual experts hired on temporary contracts who make up a quarter of the Bank’s workforce—will deny the institution access to talent, especially in the Washington headquarters where any replacements provided by consulting firms will need to have authorization to work in the US. Given short-term consultants have long been key to the Bank’s ability to deliver more for less, it is distinctly unlikely this reform will lead to savings. And a rumored pause on all contracting until the end of the World Bank’s fiscal year will hobble any remaining capacity to respond to recent events.
The ongoing integration of IFC and World Bank teams was also tried and abandoned under the One World Bank approach, not least because the IFC prefers to finance investments that come with tax breaks and exclusivity that may damage broader economic prospects. Indeed, to the extent the broader reform effort is motivated by the desire to “make the World Bank more like the IFC,” an idea bolstered by rumors of the widespread displacement of World Bank country managers by IFC staff, this ignores the fundamental difference between the institutions as they currently operate.
The World Bank has governments as the primary client, the IFC has companies. An IFC-dominated merger risks further prioritizing private deals over public policy—a phenomenon we’ve seen in education, health, telecommunications and energy. It also ignores that the IFC is failing to deliver on both volume and quality where World Bank Group support is most needed: just 46 percent of IFC projects in IDA and blend countries are ranked by the Bank’s Independent Evaluation Group as having achieved satisfactory performance, compared to 86 percent of IDA projects.
Hopefully, some of the rumors are unfounded. And to be sure, Bank management face external pressures to reform. But that is no excuse for the level of chaos we are witnessing, nor the level of opacity involved. The IMF received a similar steer from the US regarding “mission creep,” but hasn’t responded by upending the institution.
Beyond those institutional effects are impacts on staff. Some leaders may still invoke the “Hawthorne effect”—that change alone leads to better employee performance—to justify reform regardless of its merit. The rapid and tumultuous disbanding of the “program leader” job, which connected regional lending to HQ knowledge, is further evidence some in senior management in the Bank might agree. But most World Bank employees we know have reasonably high intrinsic motivation. It isn't clear they need constant revolution in order to remain awake at their desk. Instead, and across organizations, staff uncertainty about future roles and institutional direction takes up time and energy, shifting the focus from mission delivery to self-preservation. And processes as opaque as that ongoing in the World Bank breed distrust while signaling to staff that their input doesn’t matter. The result: a recent internal World Bank staff survey suggests only 40 percent think the World Bank has a culture of openness and trust. Only half of staff view World Bank Group leadership favorably (compared to two thirds who have a favorable view of their direct managers). Staff interviews also suggest there is a widespread culture of fear, reflecting the reality that it is difficult to predict who and which job families will be declared redundant next. Ironically, the employees that typically leave due to this kind of institutional chaos are precisely the ones you’d want to stay.
Staff motivation—not mere compliance with mandates from the top—is key to the success of (re)organizations. Motivated staff bring the effort that separates good work from exceptional work. For a “Knowledge Bank” relying on the high caliber of its expertise and the trust of its clients, demoralizing and counterproductive reforms threaten the institutional mission. A sad loss for us all when that mission is a world free of poverty.
As the Bank has gone from cutting project preparation times through budget controls to sacking short-term consultants and threatening country economists, it has gone from reform to improve through reform to sustain to reform without reason. We are at the point where supposedly saving the institution justifies considerably harming it. It is past time for Bank management to rethink the opacity, speed, and extent of its reorganization.
The Spring Meetings provide an opportunity for shareholders to weigh in. There are surely ways the institution could be made more efficient and responsive to clients, for example by revisiting the way safeguards work and moving further toward policy lending. And the IFC should work more harmoniously with the World Bank, including by only investing in public-private partnerships that meet best practice and through supporting industrial strategies. But shareholders should insist on transparency about reform goals, elements, timeline, and impacts. Borrowing countries who rely on the Bank’s technical credibility should ask whether this reorganization serves their interests or undermines them. Donors should ask if their resources are being deployed as effectively as possible. This is a very bad moment for the world’s largest source of development finance to be so distracted and disabled.
Thanks to Nancy Lee, Karen Mathiasen, and Shanta Devarajan for comments.
